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FALSE PROFITS

Beware of false prophets which come to you in sheep’s
clothing, but inwardly they are ravening wolves.

— Matthew 7:15

The false gods they used to invoke will leave them in
the lurch, and they will perceive that they have no way
of escape.

— Qu’ran XLI, verse 48

FALSE

PROFITS

The Inside Story of BCCI,
the World's Most Corrupt
Financial Empire

PETER TRUELL
AND

LARRY GURWIN

HOUGHTON MIFFLIN COMPANY

Boston and New York

1992

For information about permission to reproduce selections from this book, write
to Permissions, Houghton Mifflin Company, 215 Park Avenue South,

New York, New York 10003.

Library of Congress Cataloging-in-Publication Data
Truell, Peter.

False profits : the inside story of BCCI, the world’s most
corrupt financial empire / Peter Truell and Larry Gurwin.
p. cm.

Includes bibliographical references and index.
isbn 0-395-62339-1

1. Bank of Credit and Commerce International — Corrupt practices.

2. International finance — Corrupt practices. 3. Bank failures.

I. Gurwin, Larry. II. Title.

HG1978.T78 1992

364.C68 — dc20 92-37248

CIP

Printed in the United States of America
agm 10 987654321

To the memory of my parents,
Margaret and Michael Truell

— P.T.

To my wife, Jacqueline
— L.G.

Contents

A CAST OF CHARACTERS AND COMPANIES ix

prologue xiii

I THE COURTIER AND THE SHEIKH I
2 THE NETWORK 13
3 COMING TO AMERICA 31
4 THE UNDERGROUND EMPIRE 63
5 FRIENDS IN HIGH PLACES 78
6 COVERT OPERATIONS Il8
7 THE DIRTY MONEY MACHINE 155
8 FALSE PROFITS 183
9 EL DORADO 209
IO TROUBLE IN TAMPA 228
II CONTAINMENT 251

12 THE ENFORCERS 280

13 THE SHUTDOWN 311

14 CLIFFORD AND ALTMAN 330

15 THE WATCHDOGS 347

1 6 THE POLITICIANS 362

Contents

viii )

17 ROUNDING UP THE SUSPECTS 396

EPILOGUE 419

ACKNOWLEDGMENTS 436

APPENDIX:

Chronology 438
Maps 455

BCCl Corporate Organization 457
NOTES ON SOURCES 458
SELECTED BIBLIOGRAPHY 489
INDEX 495

A Cast of Characters and Companies

Many of the Arabic and Pakistani names in this book can be spelled
in different ways . Sheikh Zayed's family name , for example , can be spelled
al-Nahyan or al-Nahayan. The authors have attempted to follow the
preferences of the people mentioned.

After Financial General Bankshares was acquired in 1982, it was re¬
named First American Bankshares, as noted in Chapter 5. In subsequent
chapters, the First American name is generally used , even in discussions of
events that occurred before the name change.

Abedi, Agha Hasan. This charismatic Pakistani financier founded and led
BCCI.

Abu Dhabi Investment Authority. A government agency controlled by
Sheikh Zaved, it manages a large portion of Abu Dhabi’s oil wealth.
Adham, Kamal. The former head of Saudi Arabia’s intelligence agency,
Adham is a brother-in-law of the late King Faisal and still advises the
ruling family. He was listed as a shareholder in Attock Oil, BCCI,
Capcom, and First American Bankshares.

Akbar, Sved Ziauddin Ali. Akbar headed BCCI’s treasury division until
1986, when he became managing director of Capcom. He presided
over much of the looting of BCCI.

Altman, Robert A. A law partner and protege of Clark Clifford, Altman
served as an attorney for BCCI and First American and assisted
Clifford in the running of First American.

Attock Oil. A company in London connected to BCCI. The shareholders
included Adham and Pharaon.

Awan, Amjad. This BCCI banker handled Manuel Antonio Noriega’s
personal financial needs.

Bank of America. Based in San Francisco, the huge international bank
was one of BCCI’s biggest shareholders from its founding in 1972
until 1980.

BCCI Holdings (Luxembourg) S.A. The holding company for Abedi’s
far-flung banking empire, it controlled two main subsidiaries — Bank
of Credit and Commerce International S.A. in Luxembourg and Bank
of Credit and Commerce International (Overseas) Ltd. in the Cayman
Islands, a Caribbean tax haven.

Bin Mahfouz, Khalid. The head of National Commercial Bank, the larg-

( ix )

x ) A Cast of Characters and Companies

est bank in Saudi Arabia, which is controlled by his family, Bin
Mahfouz was a big shareholder in BCCI and First American.

Blum, Jack A. This lawyer investigated BCCI for Senator John Kerry’s
subcommittee on terrorism and drugs. He then blew the whistle on
BCCI.

Bush, George W. The president’s eldest son, he is a part owner and a
board member of Harken Energy, which got an unusually advan¬
tageous oil concession with the help of several people connected to
BCCI.

Capcom Financial Services Ltd. A commodity futures trading company in
London, it was linked to BCCI and helped it to “lose” hundreds of
millions of dollars.

Carter, Jimmy. A former president who became close to Abedi after
leaving the White House. BCCI contributed millions of dollars to his
pet projects. Carter helped BCCI project a respectable image.

Casey, William J. A fervent anticommunist, Casey headed the CIA during
most of Reagan’s presidency. The agency’s relationship with BCCI
flourished during that period.

CenTrust Savings Bank. Until its collapse in 1990, this institution based
in Miami was the largest S&L in the Southeast. Through Pharaon, it
was connected to BCCI.

Clifford, Clark M. BCCI’s man in Washington and an adviser to every
Democratic president since 1945, Clifford was also a preeminent
Washington power broker. He served as chairman of First American
Bankshares and legal counsel to both BCCI and First American.

First American Bankshares, Inc. Formerly known as Financial Gener¬
al Bankshares, it was taken over by BCCI clients in 1982 and
renamed. It soon became the biggest bank holding company in
Washington, D.C. First American owned banks in the District of
Columbia, Florida, Georgia, Maryland, New York, Tennessee, and
Virginia.

Gauhar, Altaf. With BCCI’s financial backing, he launched the Third
World Foundation and South magazine.

George, Eddie. The deputy governor of the Bank of England, he decided
that BCCI had to be shut down.

Gokal brothers. Abbas, Murtaza, and Mustapha Gokal ran the Gulf
Group, an international conglomerate of shipping and commodities
companies. The Gulf Group was BCCI’s biggest borrower.

Hatch, Orrin. A Republican senator from Utah, Hatch came to BCCI’s
aid when the bank was under pressure on Capitol Hill.

ICIC. A company in the Cayman Islands controlled by BCCI, it was used
to appropriate deposits, massage BCCI’s accounts, and serve as a
dumping ground for bad loans.

A Cast of Characters and Companies ( xi

Independence Bank. A small bank in the Encino section of Los Angeles
connected to BCCI through Ghaith Pharaon.

Jackowski, Mark V. An assistant U.S. attorney in Tampa, Florida, he was
the lead prosecutor in the first criminal case brought against BCCI in
the United States.

Kerry, John F. A Democratic senator from Massachusetts, Kerry played
an important role in exposing BCCI.

Khalil, Abdul-Raouf. A Saudi communications and intelligence maven,
Khalil was also a shareholder in BCCI, Capcom, and First American.

Lance, T. Bertram (“Bert”). A folksy Georgia banker and best friend of
Jimmy Carter, Lance was forced to resign from the Carter administra¬
tion in disgrace. He went on to help BCCI penetrate the U.S. market
and introduced Abedi to Stephens and Carter.

Magness, Bob. The founder and chairman of Tele-Communications Inc.
(TCI). He and his protege, Larry Romrell, owned stock in Capcom
and served on its board.

Mazrui, Ghanem Faris al. The head of Sheikh Zayed’s Department of
Personal Affairs, Mazrui was a senior man at the Abu Dhabi Invest¬
ment Authority and a BCCI board member.

Mazur, Robert (aka Robert Musella). An undercover agent with the U.S.
Customs Service, Mazur headed a sting operation that snared BCCI.

Morgenthau, Robert M. The Manhattan district attorney and a former
U.S. attorney in Manhattan, Morgenthau pursued and eventually
cracked the BCCI case.

Moscow, John W. An assistant district attorney in Morgenthau’s office,
Moscow directed the probe of BCCI.

Naqvi, Swaleh. Abedi’s faithful deputy, Naqvi succeeded him as chief
executive of BCCI.

National Bank of Georgia. Based in Atlanta, it was controlled by Bert
Lance until 1978, when Pharaon stepped in. First American bought it
in 1987.

Paul, David L. The chairman of Miami’s CenTru$t Savings Bank and a
friend and business partner of Pharaon’s, Paul was a major donor to
political candidates.

Pharaon, Ghaith Rashad. A flamboyant Saudi tycoon and a frequent
front man for BCCI, Pharaon was also a shareholder in BCCI and
several companies close to it, including Attock Oil, CenTrust, Inde¬
pendence Bank, and National Bank of Georgia.

Price Waterhouse. An international accounting firm that audited BCCI’s
Cayman Islands units and later most of the BCCI group.

Rahman, Masihur. BCCI’s chief financial officer, Rahman provided pros¬
ecutors with important information about the bank.

Romrell, Larry. A top official of Tele-Communications Inc. (TCI), the

xii ) A Cast of Characters and Companies

huge cable television company that bailed out Ted Turner, Romrell
served as chairman of Capcorm Romrell and TCI’s chairman, Bob
Magness, were also major shareholders in Capcom.

Stephens, Jackson. An investment banker from Little Rock, Arkansas,
and a generous political donor to presidential candidates, he runs
Stephens Inc., one of the country’s biggest brokerages. He helped
BCCI penetrate the United States.

Zayed bin Sultan al-Nahyan. The multibillionaire ruler of Abu Dhabi and
president of the United Arab Emirates, Zayed was Abedi’s most im¬
portant patron and the controlling shareholder of BCCI.

Prologue

After lining up on the sidewalk for as much as an hour in the
summer sun, the press was impatient and ill-tempered. It was stiflingly
hot in New York that day — Wednesday, July 29, 1992 — and the
Manhattan district attorney’s office was jammed with photographers,
reporters, sound technicians, lighting crews, and all the paraphernalia
of the modern media. Cameramen shoved one another to try to win a
better spot for their equipment; secretaries struggled to push open the
office’s windows to let in more air. The room, festooned with pictures
of the Kennedy family and other souvenirs of a life in public service,
reeked of the D.A.’s cheap cigars.

At 11:13 a.m., Robert M. Morgenthau walked through the back
door of his office, followed by several staff members and representa¬
tives of the U.S. Justice Department and the Federal Reserve, to face
the waiting crowd. Uncharacteristically, the district attorney was sev¬
eral minutes late. The seventy-two-year-old prosecutor stood behind a
wooden lectern as his colleagues arranged themselves behind him.
Some reporters stood on leather chairs to get a good view; others
squatted on any spare piece of floor space.

The slim, white-haired D.A. read in a quiet, halting voice from his
prepared text: “A New York County grand jury has returned two
indictments, charging six individuals, including Clark M. Clifford and
Robert A. Altman, for criminal conduct arising out of the operation of
the Bank of Credit and Commerce International — BCCI.” This bank,
Morgenthau said, was “a criminal enterprise” that had “bribed central
bankers, government officials, and others worldwide to gain power
and money.” Among those bribed, the indictment alleged, were Clif-

( xiii )

xiv ) Prologue

ford and Altman; the grand jury accused them of receiving tens of
millions of dollars from the corrupt bank for their part in its illegal
schemes.

These were shocking charges. Clark Clifford had been one of the
most powerful and admired men in the nation’s capital since the
1940s. An elder statesman of the Democratic party, he had advised
every Democratic president from Harry Truman to Jimmy Carter and
had served as Lyndon Johnson’s secretary of defense. After years
of cultivating a reputation as a man of integrity, Clifford now faced
charges that carried a maximum penalty of eight years in prison
and $80 million in fines. Altman, his forty-five-year-old protege,
could be sentenced to twenty years’ imprisonment and $80 million in
fines.

In addition to the indictments, Morgenthau outlined a plea bargain
his office had negotiated with Kamal Adham, the former intelligence
chief of Saudi Arabia and an adviser to that country’s King Fahd.
Adham admitted to helping BCCI in its crimes in the United States and
agreed to pay a $105 million fine. He also pledged complete coopera¬
tion with the Manhattan district attorney and other U.S. authorities,
raising the possibility that someone from the bank’s inner circle would
testify against Clifford, Altman, and other defendants.

After reading his prepared statement, Morgenthau took questions.
When one reporter tried to bait him by asking about future indict¬
ments and other sensitive issues, the seasoned prosecutor said, “You
know better than to ask me that.” There were also provocative ques¬
tions about the strength of the evidence his office had gathered. In
some instances, he conceded, his investigators had found witnesses but
no supporting documentation; in others, they had documents but no
witnesses. Within forty-five minutes, the press conference was over.
News agency reporters hurried off to find telephones to start filing
their stories.

The indictment of Clifford and Altman was a milestone for Robert
Morgenthau. For more than three years he had struggled to piece
together the secret history of BCCI and bring some of the culprits to
justice. It had been an extraordinarily challenging task, partly because
of BCCI’s political clout. It had pitted Morgenthau’s prosecutors and
detectives against much of the Washington establishment, in which
BCCI and its associates seemed to have an unlimited number of friends
and allies. Morgenthau and his investigators were also challenged by
the vast scope and complexity of the bank’s criminality. In his long

Prologue ( xv

career in law enforcement, the New York prosecutor had never en¬
countered anything like BCCI.

For Morgenthau, the affair had begun in the spring of 1989 when a
former U.S. Senate investigator had turned up at his office with a string
of allegations about BCCI’s involvement in drug money laundering
and other crimes. The Manhattan district attorney, long known for his
passion for attacking white-collar crime, started a small investigation
under one of his most trusted lieutenants, Assistant District Attorney
John W. Moscow, a streetwise New Yorker famed for his one-liners.
Gradually Morgenthau’s office built a picture of a rogue bank that
seemed to break laws regularly and with impunity. Several former
BCCI officials provided evidence about BCCPs modus operandi. As
other government investigators in the United States and overseas ig¬
nored BCCI or failed to press ahead with probes, Morgenthau’s office
persevered, undeterred by the many roadblocks thrown in its path by
the bank and its powerful friends. By the spring of 1991, the D.A. was
able to empanel a grand jury to hear the mounting evidence his office
had collected against the bank and its principals.

Government officials in many countries had known for years that
BCCI was a corrupt bank, but none of them had taken serious action
until they were forced to do so by Morgenthau’s probe. The Federal
Reserve and the Department of Justice as well as investigators in
Britain and continental Europe waited anxiously to see what Morgen-
thau would do. When it became clear that he was prepared to bring
serious criminal charges against BCCI, bank regulators in London,
New York, and other financial centers seized the corrupt institution on
July 5, 1991, and put it out of business.

Just over three weeks later, Morgenthau announced the first major
indictment of BCCI. A New York grand jury charged the bank and its
founder, the Pakistani financier Agha Hasan Abedi, and his deputy,
Swaleh Naqvi, with perpetrating what Morgenthau called “the largest
bank fraud in world financial history.”

In the months following, Morgenthau focused his attention on other
alleged culprits, including Clifford and Altman. In the D.A.’s view, the
two lawyers had played a critical role in the BCCI affair. Clifford had
used his considerable prestige and political influence to help the bank
expand its empire and protect itself from government investigators.
Morgenthau felt he could prove that Clifford and Altman had helped
BCCI carry out a secret and illegal scheme to acquire control of First
American Bankshares, the biggest banking company in Washington.

xvi ) Prologue

Clifford had been chairman of First American, Altman its de facto
chief executive. As the scandal spread, Clifford and Altman steadfastly
maintained that they — like the nation’s top regulators and politi¬
cians — had been deceived by BCCI.

Now, in the summer of 1992, the Manhattan district attorney was
investigating BCCI’s political allies in Washington and in the capitals
of Europe and the Arabian peninsula.

Clifford and Altman were booked at Manhattan’s huge and grimy
central criminal courts building the same morning that Morgenthau
announced the charges against them. They were spared the rigors of
“central booking,” a humiliating routine in which groups of defen¬
dants are processed in assembly-line fashion. “It is the normal courtesy
extended to an eighty-five-year-old defendant with no prior record and
a recent history of heart trouble,” John Moscow told reporters as he
stood by the elevators after Morgenthau’s press conference. Neverthe¬
less, both men were fingerprinted, and they were scheduled to come
back the following week for mug shots.

Shortly after two o’clock, the two lawyers returned to the courts
building for their arraignment before Judge John A. K. Bradley, a
short, rumpled man wearing black-rimmed spectacles. Bradley, who
often tried complex financial cases, would hear Clifford’s and Alt¬
man's pleas and later set a date for trial. A tremendous clacking of
camera shutters announced the arrival of the two men outside the
building. When they entered the courtroom, however, no photogra¬
pher awaited them; they had exercised their right to ban cameras from
the room.

Inside, Altman strode to take his place at the defendants’ table. The
white-haired Clifford moved slowly up the aisle, his hallmark gray
fedora in hand. He was as elegant as ever, wearing a double-breasted
pinstripe suit and a white shirt with French cuffs. Carl Rauh, a defense
lawyer for the two men, carried Clifford’s briefcase, a gesture that
underscored his client’s frailty.

Courtrooms and legal proceedings were familiar to Clifford. After
all, he had been an attorney for most of his life, having begun the
practice of law more than six decades earlier. But this was the first time
that he had attended court as a defendant in a criminal case. He took
his seat beside Altman, a man who was much more than his law
partner. They had such a strong personal bond that several friends
described Altman as the son Clifford never had. For more than two

Prologue ( xvii

decades Clifford had groomed Altman, turning him into a consum¬
mate Washington power broker. Like his mentor, Altman was a friend
of some of the most powerful people in town, including influential
members of Congress and senior officials of the Bush administration.

The court clerk asked the two defendants to stand while he read part
of the indictment. When asked for their pleas, Clifford and Altman
answered in unison: “I plead not guilty.” Judge Bradley released them
on their own recognizance. They left the courthouse by a side door,
ignoring the shouted questions of reporters as they climbed into a
chauffeur-driven Cadillac.

The indictment of Clifford dealt with only one aspect of the BCC 1
affair, which by the summer of 1992 had become a vast and compli¬
cated scandal embracing a multitude of individuals and institutions
around the world. Before its closure, BCCI had operated in seventy-
three countries and had been a major force in such financial centers as
New York, London, Geneva, Paris, and Hong Kong and in the capitals
of the Persian Gulf, where many of BCCFs sponsors lived.

Among the most important of BCCI’s patrons was Sheikh Zayed bin
Sultan al-Nahyan, the aging ruler of the Arab emirate of Abu Dhabi.
Zayed cuts a medieval figure in a modern world; he visits his countless
palaces and mansions — from Pakistan to Spain’s Costa del Sol —
accompanied by a court jester and a huge entourage of relatives and
retainers. Transformed from desert Bedouin to petrobillionaire in the
space of a few years, Zayed once spent millions on a wedding for a son
he sired with one of his harem of more than a dozen wives.

Despite such unorthodox backers, BCCI had outwardly seemed like
a normal financial institution, with attractively designed branch of¬
fices, its own traveler’s check business, and a reputation for financing
international trade. But behind this convincing facade, BCCI was a
criminal enterprise that catered to some of the most notorious villains
of the late twentieth century, including Saddam Hussein, the blood¬
thirsty ruler of Iraq; leaders of the Medellin drug cartel, which controls
the bulk of the world’s cocaine trade; Khun Sa, the warlord who
dominates heroin trafficking in Asia’s Golden Triangle; Abu Nidal, the
head of one of the world’s leading terrorist organizations; and Manuel
Antonio Noriega, the drug-dealing former dictator of Panama. BCCI
not only assisted others in committing crimes, the institution was itself
a fraud. The men who ran the bank collected billions of dollars in
deposits and then systematically looted it. BCCI insiders had also

xviii ) Prologue

plundered other financial institutions — in Europe, the Middle East,
and the United States.

This criminal rampage lasted for nearly two decades. Rarely was
BCCI hindered by bank regulators, law enforcement authorities, or
politicians, in part because it had bought off many of the people who
should have been policing it. Its political reach was awesome: the
BCCI network was connected to some of the most powerful people in
the world, including Middle Eastern potentates, Asian strong men,
and political leaders in Europe and the United States. The bank and its
allies even had personal and financial ties to people in the inner circles
of President George Bush and the man who was aiming to unseat him.
Governor Bill Clinton of Arkansas.

BCCI officials used a panoply of techniques to cultivate powerful
people. Some were bought off with banknotes in a briefcase. Others
were provided with prostitutes, or “dancing girls,” as Abedi’s Paki¬
stani colleagues preferred to call them. Abdur Sakhia, a veteran BCCI
official, has said that payoffs to VIPs were made “in the form of cash
or the hiring of their relatives, contributions to their favorite charities,
payment for their medical bills.” In other cases, “charities were
funded, their projects were financed at favorable rates, loans [were
granted] at favorable rates. So it took various shapes and forms.” No
matter what the method, the purpose was always “to buy influence.”
BCCI used this influence to protect itself from its enemies; equally
important, the bank was actively involved in promoting the political
agendas of its backers, especially the rulers of Arab nations in the
Persian Gulf.

BCCI’s ability to operate with impunity for so long may also have
had something to do with its connections to the murky world of
intelligence. It had generated tremendous goodwill at the CIA by
assisting in a series of sensitive covert operations. BCCI’s relationship
with U.S. intelligence was so close that questions have been raised
about whether the CIA was one of the original sponsors of BCCI —
and even one of the beneficiaries of its larceny.

The political and intelligence dimensions of the affair make it far
more than a financial scandal. Some pundits have labeled it an “inter¬
national Watergate.” Others have called it “the mother of all scan¬
dals.” It is a tale of intrigue and political corruption on a worldwide
scale with an amazing cast of characters. The most remarkable of all is
the founder and guiding force of BCCI, Agha Hasan Abedi. It was his
vision, charisma, and hunger for power that propelled BCCI and

Prologue ( xix

inspired the almost religious devotion of his staff. Alberto Calvo, who
helped to establish BCCI’s network of offices in Latin America, de¬
scribes Abedi as “intelligent, brilliant, lucid and shady; prophetic;
angel and devil; generous to the point of absurdity; a megalomaniac; a
manipulator.”

So successful was Abedi that one observer called him the “Moriarty
of finance,” an allusion to Sherlock Holmes’s nemesis who was blamed
for half the crime in London. In Abedi’s case, it would eventually seem
as if he had a hand in half the crime in the world.

FALSE PROFITS

The Courtier and
the Sheikh

In early autumn, Abu Dhabi can seem cool at night after the
daytime’s dizzying heat. One evening in September 1972, a fashion¬
ably dressed Pakistani businessman walked quickly from his limousine
to a suburban villa, and anyone who saw him might have assumed that
he was eager to escape the chill air. But Agha Hasan Abedi had another
reason to hurry: he had just received good news and wanted very much
to share it with Majid Ali, his friend and confidant.

The fifty-year-old Abedi strode through the hallway into Ali’s living
room, smiling at his host’s family and the half dozen or so friends who
were visiting. After politely but hastily greeting each person in turn,
Abedi took Ali by the arm and led him from the room, whispering
excitedly with each step.

For months, the two men had been secretly discussing Abedi’s plan
to secure the backing of Sheikh Zayed bin Sultan al-Nahyan for a new
international banking venture. Zayed was the fantastically wealthy
ruler of Abu Dhabi as well as president of the United Arab Emirates, of
which Abu Dhabi was the most important part. Abedi had spent the
past six years and more cultivating the sheikh from his base in Karachi,
Pakistan. It was there that Abedi ran United Bank, which he had
founded thirteen years earlier with money provided by his patrons, the
Saigols, a family of shipping and textile magnates. But Abedi’s ambi¬
tions had always ranged beyond Pakistan, and in his old friend Ali, a
financial adviser to the sheikh, Abedi saw an opportunity. A fellow
Pakistani, Ali did all he could to secure the backing of the ruler and
other sheikhs for a new enterprise.

Within minutes of leaving the room, Abedi and Ali returned arm in

( 1 )

FALSE PROFITS

2 )

arm, beaming at the assembled company. “You are among close
friends here and you should share the good news with them, too,” Ali
said to Abedi, nodding to his wife and their guests. Standing in the
middle of the room with his muttonchop sideburns and carefully
coiffed mane of black hair, Abedi looked every bit the nineteenth-cen¬
tury preacher addressing his flock. “It is truly by the grace of God,” he
said, “that the sheikhs have been kind enough to give me their trust
and support the new bank that we are creating.”

It had been a harried few months for Abedi, who had shuttled
between Pakistan, Abu Dhabi, Britain, and the United States to line up
support for the new bank. Wooing Sheikh Zayed and other Arab
leaders in the Persian Gulf at the same time as he courted San Fran¬
cisco’s Bank of America — then the largest bank in the world — was a
challenge, even for such a charming and persuasive man.

The new institution, Abedi told his audience in Ali’s living room,
would enable him and his colleagues from United Bank to recover
from the incredible turmoil of the past few years. Pakistan had been
torn apart in 1971 when East Pakistan broke away to form the nation
of Bangladesh. Many United Bank employees in the east had been
displaced. What is more, Pakistan’s leader, Zulfikar Ali Bhutto, had
instituted radical economic policies, including the nationalization of
several industries, one of which was banking. When United Bank was
taken over by the government, Abedi was one of several bankers
placed under house arrest by Bhutto; they were suspected of having
helped the previous military regime.

Now, Abedi told his approving listeners, Providence had intervened
to provide a secure future for the employees of United Bank. Their new
haven would be in Europe. Abedi’s bank would be incorporated in
Luxembourg but would have offices throughout the world. In choos¬
ing a name, Abedi signaled the scope of his ambition. He called it the
Bank of Credit and Commerce International.

Abedi’s description of the role played by Divine Providence was not
quite accurate. The Pakistani banker had given Providence a great deal
of help in his courting of Sheikh Zayed and other local potentates.
Abedi owed much of his success to his origins. For more than a
century, his family had learned how to cultivate powerful men in their
role as courtiers to the Shi’ite Muslim rajahs of the city of Mah-
mudabad, in what is now the northern Indian province of Uttar
Pradesh.

The Courtier and the Sheikh

( 3

The Shi’ites, who derive their name from the Arabic term Shiat Ali
(party of Ali), form the main minority sect of Islam. Their tradition
dates from the earliest days of Islam, for they believe that the authority
of the Prophet Muhammad was passed to his son-in-law Ali. In con¬
trast, the Sunni sect, whose name comes from Sunnat Allah (way of
God), maintains that authority was passed on to a series of caliphs
chosen from Muhammad’s followers. In the wars that followed the
Prophet’s death, the Sunnis triumphed, establishing themselves as the
dominant sect.

Nevertheless, strong Shia communities prospered, particularly in
Iran and Iraq as well as Mahmudabad. The cities of Mahmudabad and
Lucknow were the center of the once-great Mughal Empire. According
to local legend, Abedi is directly descended from a participant in a
largely Muslim rebellion against the British in 1857. His forebear, the
story goes, was exhibited in a cage in the streets of Lucknow once the
colonialists reasserted control.

Abedi was born in Lucknow on May 14, 19x2, and “grew up
moored to a rich Muslim tradition, including the sense that patronage
and power are the essence of empire,” in the words of Najam Sethi, a
Pakistani journalist. “Abedi’s philanthropy and his fondness for per¬
fume, gourmet cuisine, fine clothing, art and the color white for its
purity can all be attributed to his Lucknavi Muslim heritage.”

The young Abedi enjoyed the privileged education of a courtier’s
son. “I had a master’s degree in English literature in 1945 and my law
degree in 1946,” he told American lawyers several years later. He
neglected to mention that both qualifications were from Lucknow
University, an institution not likely to impress the attorneys. In 1946,
the rajah of Mahmudabad recommended Abedi for a job with Habib
Bank in Bombay. After all, the Abedis were loyal confidants who
helped the rajahs live regally while most of their subjects toiled in rural
poverty.

Abedi’s banking career began just as the colonial era was coming to
an end in India. In 1947, British India split into independent states
dominated by either Muslim or Hindu. The predominantly Muslim
territories to the northwest and the northeast became Pakistan, leaving
the rest of India to the majority Hindu population. Chaos and sectar¬
ian fighting left hundreds of thousands dead as Muslims struggled to
reach the new state of Pakistan and Hindus rushed to India. Like many
Muslim businesses in India, Habib Bank decided to move its head¬
quarters to Pakistan at the time of the partition, and the twenty-five-

FALSE PROFITS

4 )

year-old Abedi went with it. The new state offered great opportunities
for an aspiring banker, particularly because it had to start its financial
institutions from scratch.

Like many young Muslims from India, Abedi found the move a
traumatic experience that bred a lifelong sense of insecurity. His back¬
ground had made him a would-be aristocrat in British India, but he
was a double outsider in Pakistan: a Muslim immigrant from India and
a Shi’ite in a largely Sunni country. At the same time, the migration to
Pakistan fostered a clannishness within the community of former In¬
dian Muslims. Throughout his career, Abedi would choose his closest
associates from the Shi’ite Muslim oligarchy that once prospered in
Uttar Pradesh. The experience also gave him an appreciation and
affinity for minority and immigrant societies, particularly Pakistani
communities around the world.

Abedi’s career at Habib Bank flourished in Pakistan, but the young
man was eager to run his own organization. That chance came after he
helped the powerful Saigol family by arranging financing for a textile
plant in the poor northern Pakistani town of Quetta. In the late 19 50s,
the Saigols put up the money for a new institution — United Bank —
and named Abedi chief executive. Abedi was anxious to project a
prestigious image. He was concerned about “the high quality of ap¬
pearance of the offices,” according to a former colleague, and he
recruited a former prime minister, I. I. Chundrigar, to serve as chair¬
man of the board.

Every major success that Abedi had achieved up to this point had
come about with the aid of powerful patrons. The rajah of Mah-
mudabad had helped him find a job at Habib Bank. The Saigols had
put him in charge of United Bank. Although he was now an important
financier, Abedi continued to seek new patrons and allies. He forged
ties with the Pakistani military, which wielded considerable influence
in the country’s politics. Through the Saigols, Abedi met other import¬
ant businessmen in Pakistan and in the Arab world. It was in the
Middle East, in fact, that he would find the most important patron of
his life, Sheikh Zayed of Abu Dhabi. At the time, Zayed was an
obscure Bedouin chieftain, but he would become one of the richest
men in the world.

When the Middle East was carved up during the Age of Imperialism,
the dominant powers in the region were Britain, France, and the
Ottoman Empire. In the early part of this century, new nations began
to achieve independence. Saudi Arabia and Iraq were among the first.

The Courtier and the Sheikh

( 5

Others followed over the years, including Jordan, Israel, and Leba¬
non. One of the last places to become independent was a territory
on the Persian Gulf east of Saudi Arabia. A British protectorate, it
consisted of seven sheikhdoms called the Trucial States: Abu Dhabi,
Dubai, Ajman, Fujeirah, Ras al-Khaimah, Sharjah, and Umm al-
Qaiwan.

The Trucial States were sparsely populated, desolate, and extremely
backward. The largest, Abu Dhabi, had just 46,000 inhabitants in
1968. All of the rest combined had another 134,000. The biggest
“city” in Zayed’s emirate — Abu Dhabi town — was a sleepy and
dusty place with a few hundred buildings at most. It suffers from
stifling humidity and temperatures of well over 100 degrees Fahrenheit
in the summer months. Smaller fishing communities were scattered
along the emirate’s desert coastline, and a few Bedouin tribes were
clustered around the occasional oasis in the desert interior, which
extended a hundred miles and more to the mountains of Muscat and
Oman in the south.

Dubai, the second most important sheikhdom, was more cosmopol¬
itan. With its unmatched natural harbor, it served as a port and en¬
trepot for all the sheikhdoms. It also played an important role in trade
with nearby India, and many emigrants from the Indian subcontinent
settled there. Unlike Abu Dhabi, Dubai had a strong commercial tradi¬
tion. There were fishermen, pearl divers, and smugglers. Gold con¬
cealed in boats from Dubai was taken across the Arabian Sea and sold
to Indian hoarders.

The Trucial States hardly seemed like a promising place to find a
patron, but Abedi must have sensed that it would not be a backwater
forever. Like other parts of the British Empire, it was destined to
become independent. Furthermore, the Trucial States might even be
rich one day, for they were endowed with large quantities of oil, the
vast majority of it in Abu Dhabi. Neighboring countries had already
enjoyed an economic boom after oil was developed. The major West¬
ern oil companies had been drilling in the northern Gulf— Iraq, Iran,
Kuwait, and Saudi Arabia — for several years, but it was only in i960
that oil was discovered in Abu Dhabi, and it was first pumped in
commercial quantities two years after that.

In the mid-1960s, Abedi began to court the desert potentates, con¬
centrating on Abu Dhabi.

Abu Dhabi had been dominated by the al-Nahyan family for genera¬
tions and, since 1928, ruled by Sheikh Shakhbut bin Sultan al-Nahyan.

FALSE PROFITS

6 )

The second most powerful figure in the family was his brother Zayed,
who was born about a decade before Shakhbut became ruler.

Zayed lived in the town of al-Ain, about a hundred miles south of
Abu Dhabi town, in a clay fort surrounded by red sand dunes. As
governor of Abu Dhabi’s southeastern province, he typically spent his
days mediating between tribesmen over camel rustling and negotiating
with the neighboring rulers, the sultan of Muscat and the governor of
the neighboring Saudi Arabian province.

He had all the traits that Bedouin expected in a leader. When the
British explorer Wilfred Thesiger met him at the Buraimi oasis near
al-Ain in 1948 and 1949, he was impressed by the young Arab chief¬
tain, characterizing him as “a powerfully built man of about 30 with a
brown beard.” Zayed, said the Englishman, had “a strong intelligent
face, with steady observant eyes.” Zayed wore a dagger and a car¬
tridge belt and carried a rifle. A wily leader, he seemed to command the
admiration of others. The Bedu tribesmen liked him for “his easy
informal ways and his friendliness, and they respected his force of
character, his shrewdness and his physical strength,” according to
Thesiger’s account. “Zayed is a Bedu,” the tribesmen would say. “He
knows about camels, can ride like one of us, can shoot, and knows
how to fight.” Skirmishes with other tribes and rival camel rustlers
were common. Zayed, of course, had his own share of ruffians and
outlaws in his entourage, for as a crafty tribal leader he clearly pre¬
ferred to have them with him rather than in some rival sheikh s fort.

In the foothills of the mountains, Zayed was able to indulge his great
loves, reciting and composing poetry and hunting with falcons and
salukis. He would take trips of several weeks to catch houbara, as that
turkey hen-size bird, the McQueen’s bustard, is known locally. Desert
hares and antelope were other favored quarry.

Zayed was highly regarded by the British, who considered him more
progressive than his brother. Shakhbut was so out of step with the
times, he once argued that the oil companies had more use for money
than he did. He had increasingly frustrated both the British and his
tribal subjects by refusing to push Abu Dhabi’s development or to
distribute the growing revenues derived from oil exports.

By contrast, Zayed was eager to develop the desert sheikhdom. As
governor of the southeastern province, he had pressed Shakhbut to
finance a simple development plan for the Buraimi oasis and brought
in an agricultural expert to argue his case. Shakhbut would have none
of it, and there was a showdown between the brothers. “My people

The Courtier and the Sheikh

( 7

know more about agriculture in their own land than you can tell
them,” the sheikh told the agricultural expert with a sneer. As for
spending money on an agricultural development plan, “The budget is
a pure waste of money,” Shakhbut said. “We don’t want it and we
won’t have it. What can you tell us that we don’t know?”

Zayed was terribly disappointed but nevertheless retained the agri¬
cultural specialist, a Pakistani named A. H. Khan, paying him out of
his own pocket. “The most disheartening feature of all was Shakhbut’s
simple refusal to give his own people, a pastoral, agricultural and
fishing society, the easy assistance which his growing wealth could
provide,” said the political agent Colonel Hugh Boustead, reflecting
the prevailing British wisdom on Shakhbut.

With encouragement and help from the British, Sheikh Zayed left
his wild frontier life to depose his elder brother in a bloodless coup
d’etat — the first time in generations that a coup had been accom¬
plished in Abu Dhabi without murder. The history of the Nahyan
family was beset with fratricide, but the mother of Zayed, Shakhbut,
and their two brothers made them, as youths, swear that they would
never do violence to one another. Thus spared by Zayed, Shakhbut
spent a few years’ exile in France, eventually returning to live out his
life quietly in Abu Dhabi.

Although the British had installed Zayed, they did not treat him
especially well. They practically forced him to yield to Saudi Arabia’s
demands for additional territory and an oil field to settle a festering
border dispute. Earlier, the British had steadfastly backed Zayed’s
legitimate claims; now they merely wanted the dispute settled, even if it
meant yielding to the weaker claims of the stronger party.

Despite this and other periodic frictions, Zayed became aligned with
Saudi Arabia. In an increasingly democratic world, absolute rulers like
the king of Saudi Arabia and the sheikh of Abu Dhabi had to stick
together, for they faced similar threats. In the 1960s and 1970s these
came mainly from radicals, communists, and others, supported by
Egypt and the Soviet Union. The Saudis had aided royalist Yemeni
forces through much of the 1960s against their republican opponents,
who were backed by Egypt.

Zayed was popular in Abu Dhabi — and certainly more progressive
than his brother — but he had some obvious limitations. One was his
lack of education, particularly in financial matters. For a time after his
ascension, Zayed’s monies and gold bars mostly remained where
Shakhbut had kept them: in a storeroom of the traditional clay fort in

FALSE PROFITS

8 )

Abu Dhabi. Rats had eaten into the notes there, some of which dated
from Queen Victoria’s time, or so the story goes.

With great reluctance, Zayed finally agreed to have his funds re¬
moved from the palace in Land Rovers and taken to a branch of the
British Bank of the Middle East (virtually the only bank in the country)
with a musket-toting tribesman riding on top of each vehicle. To the
consternation of the bank’s staff, Zayed appeared several days later,
unannounced, demanding to see his money. Apparently it took a cou¬
ple of days and an emergency flight from Bahrain to assemble sufficient
funds.

Zayed’s ignorance of finance was certainly no drawback in Abedi s
eyes. The Pakistani banker would be more than willing to assist the
ruler.

Abedi’s courtship of Sheikh Zayed began around the same time that
the ruler came to power. Abedi also began cultivating key figures in
neighboring sheikhdoms, including Dubai’s Sheikh Rashid bin Said
al-Maktoum, a wily merchant who was suspicious of outsiders. The
banker also developed close ties to members of the rulers’ families.

In the mid-1960s, Abedi and an assistant flew to Abu Dhabi in a
two-seat aircraft, according to Najam Sethi, bearing “an exquisite
hand-knotted carpet under his arm.” After an audience with the
sheikh, Abedi was granted permission to open a branch of United
Bank in Abu Dhabi. Zayed would also deposit money in the Pakistani
bank. Abedi is said to have advised the manager of the new branch:
“Hang on to the sheikh’s coattails.”

Zayed became a frequent visitor to Pakistan, and Abedi treated him
as if he were the head of state of a major industrial country. The banker
would arrange for hotels as well as travel and entertainment for Zayed
and his entourage of relatives, servants, and retainers. Abedi also
arranged hunting excursions for the sheikh. Abdullah Darwaish, an
adviser of Zayed’s who later ran the ruler’s personal office and served
as ambassador to Pakistan, said that when he first met Abedi in 1969
he could see that Zayed and the banker were friends. Abedi’s efforts to
cultivate Zayed and the other rulers were soon rewarded, for these
obscure potentates soon became leaders of an independent country —
a very rich one.

Britain, beset by economic malaise at home, decided to withdraw
from the Trucial States and hastily arranged a partnership of the seven
emirates. One day in December 1971 the British flag was lowered and

The Courtier and the Sheikh

( 9

an independent country was born, the United Arab Emirates (UAE).
One historian described it as “the fig leaf with which the British
government hoped to conceal its diminished parts from the quizzical
gaze of the outside world.”

The British refused to leave any troops in the UAE. Eager to ensure
continued British protection from Iranian and Saudi Arabian expan¬
sionism, the rulers of Abu Dhabi and its neighbors had even offered to
pay for a continued British military presence. But the British pulled
their last remaining troops, a battalion of the Royal Irish Rangers,
from the emirate of Sharjah that same December.

Inevitably, the UAE was dominated by Sheikh Zayed, who ruled
what was by far the largest component, with as much as 85 percent of
the federation’s land area and the vast majority of its oil. Four of the
other six emirates — Ajman, Fujeirah, Ras al-Khaimah, and Umm
al-Qaiwan — have virtually no oil or gas reserves; the remaining two,
Dubai and Sharjah, have only modest energy resources. Abu Dhabi is
the prize, with oil reserves that are estimated to total as much as 10
percent of the world’s known resources — a stunning amount of
wealth for a country with only a few hundred thousand people.

As ruler of Abu Dhabi, Sheikh Zayed has absolute control over this
wealth, as one of his lawyers later explained. “All the natural resources
of the states,” he said, “are also regarded as the personal property of
the ruler and his heirs, who enjoy complete authority to utilize them as
they see fit.”

The value of that oil soon became apparent to the world. Oil prices
began to rise in 1970 and 1971, thanks in large part to aggressive
bargaining by Libya’s leader, Moammar Qaddafi. The oil shock was
just around the corner, and it would bring incalculable wealth to
Sheikh Zayed and the other oil potentates in the region — as well as
incalculable opportunity for Agha Hasan Abedi.

Zayed and his country were not prepared for the economic tumult and
development that the Gulf would see in the 1970s after oil prices
soared. Abu Dhabi not only had few people, it lacked the skills neces¬
sary to develop a modern state. Labor and technical help increasingly
had to come from overseas.

There was no shortage of candidates to fill this void, which had only
been enlarged by the hastiness of Britain’s departure. Businessmen
from Europe, the United States, and Japan, workers from poorer Arab
lands like Yemen, Egypt, and the Sudan, and servants and profession-

FALSE PROFITS

IO )

als from India and Pakistan rushed to earn higher wages in Abu Dhabi.
To be sure, many of those who flocked to the Gulf were opportunists
and con men. “Zayed’s court is packed with a host of impostors,
intriguers, sycophants and flaneurs (most of them northern Arabs),
who ceaselessly jostle with one another for his attention and favour,”
wrote J. B. Kelly, a British academician who was an adviser to Zayed.
“Flattering, wheedling, shamelessly soliciting for personal ends, they
swarm about the person of the ruler like so many flies.”

Zayed and his family already had a special affinity for Pakistan, a
few hundred miles across the Arabian Sea. It was Muslim, and it was
near enough for easy access from Abu Dhabi but not so close as to be
threatening. The sheikhs admired the Pakistanis, especially those in the
military and from the northern tribal homelands, for their courage and
martial skills. These fellow Muslims had other needed abilities, too, as
Khan, the agricultural expert, had shown by helping Zayed develop
the Buraimi oasis. A few members of the UAE’s ruling families went to
college in Pakistan in the 1960s. With a vastly greater population and
an established educational system, Pakistan could provide many of the
skills that the sheikhdoms lacked.

Strategically positioned between South Asia and the Middle East,
the Pakistanis were experienced in international politics and had for
more than a century witnessed and even participated in the Great
Game of wrestling among the world’s foremost powers of that era —
Britain, Germany, Russia, and the Ottoman Empire — for control of
the northwest frontier passes that lead to Central Asia. These people
had been actors on a critical international stage. Such worldliness
impressed the sheikhs of the Gulf, who in the 1970s were struggling to
come to terms with their significantly greater international role.

Pakistan could also provide the desired military assistance. Its offi¬
cers gradually replaced the British as instructors for the sheikhdoms’
fledgling defense forces. Pakistan and Abu Dhabi had also shared some
important experience. As part of British India, Pakistan too had expe¬
rienced colonial rule.

These were exciting times for everyone in Abu Dhabi, and especially
for the members of the educated Pakistani elite who had come to work
for Sheikh Zayed. Many, like Abedi, believed that the opportunities in
their own country were narrowing. Bhutto was intent on rapidly
introducing a new brand of socialism to Pakistan. Abedi, as we have
seen, was detained because of his ties to the previous regime.

When the time came to establish BCCI, it was relatively easy for
Abedi to secure the backing of Sheikh Zayed and other UAE rulers.

The Courtier and the Sheikh

( ii

His relationship with Zayed was so close that one former colleague of
the banker’s, Abdur Sakhia, even ascribed to Abedi a role in the
founding of the federation. “Abedi created the UAE,” said Sakhia.
“He planted the idea of the UAE as a federation to Sheikh Zayed.”
These personal relationships counted for a great deal, as did Zayed’s
need for foreign expertise to handle his mounting oil revenues. Ever
intent on discretion, Zayed was also secure in the knowledge that
Abedi would disguise his degree of ownership. His new bank was a
convenient vehicle for other sheikhs in the region as well. By lending
their names to the venture, they could make good money.

Abedi’s developing friendships with other powerful Arab figures
would prove useful. Kamal Adham, a top foreign policy adviser to
Saudi Arabia’s King Faisal and the country’s intelligence chief, and
Ghaith Pharaon, the son of another adviser to the king, would both
become important shareholders in BCCI and other ventures of Abe¬
di’s. The bigger challenge was to bring in a Western partner.

At a meeting early in 1972, Abedi explained to Swaleh Naqvi, his loyal
deputy from United Bank, and Masihur Rahman, BCCI’s future chief
financial officer, his dream for a new bank — “a world bank, a global
bank for the Third World,” as he put it. When Rahman expressed
incredulity, Abedi said, “Rahman, in ten years’ time you’ll see, we will
all be millionaires.” Abedi, said Rahman, “had lined up backing from
Sheikh Zayed. All that was left was to find a big international bank to
provide the instant prestige to break out of the confines of the Third
World.”

Abedi searched tirelessly for a powerful Western partner in the first
half of 1972. In February — just weeks after his release from house
arrest — he flew to New York, where he met with Bank of America’s
Roy P. M. Carlson, the head of the bank’s Mideast-Africa region, at the
Waldorf-Astoria Hotel on Park Avenue.

There were some ironic parallels between the two banks. Bank of
America, founded by A. P. Giannini in the early years of this century,
was originally very much an ethnic bank; its early customers were
largely Italian immigrants. Similarly, Abedi’s new bank would base its
rapid growth on the Pakistani and Muslim Indian emigre communities
around the world.

As it happened, Abedi and Bank of America had reciprocal needs.
The Pakistani banker, eager to build a new type of international insti¬
tution with a focus on developing countries, needed a prestigious
partner to win credibility in the most important world financial mar-

FALSE PROFITS

12. )

kets — New York, London, Hong Kong, and Tokyo. Meanwhile, at
Bank of America, Carlson and his colleague Samuel Armacost, who
would later become B of A’s president, were eager to build up their
bank’s operations in the Middle East. Its large rivals, like Citibank and
Chase Manhattan, had stolen a march by opening branches there in
the 1950s and 1960s. Armacost, a Lebanese American, hoped to es¬
tablish ties in the Middle East and prosper from the oil boom. Abedi,
who claimed to have the backing of Zayed and other wealthy poten¬
tates, could provide an entree to the region.

What Abedi described to Carlson at the Waldorf was a truly interna¬
tional bank, founded with Arab and American capital, with a multina¬
tional staff that would be managed by Abedi and his lieutenants from
United Bank, with some guidance from Bank of America. As any big
institution might, Bank of America took some months to decide, but it
finally accepted Abedi’s terms. It was so desperate to expand in the
Middle East that it even allowed Abedi to have complete control over
the operations and administration of BCCI and permitted him to use
its logo on the bank’s letterhead. Abedi flew to San Francisco for a
celebratory lunch at B of A’s headquarters.

The initial capital was a modest $2.5 million, so Bank of America
had to invest just $625,000 for its 25 percent stake. With its
shareholding, it won access to Sheikh Zayed and several other
sheikhs — as well as access to some of the region’s oil wealth.

Abedi was a man in a hurry, the finance director, Masihur Rahman,
has recalled. “He was already an older man when he began BCCI, and
he was determined not to waste time in taking his vision and turning it
into something very big.” Initially, the head office was in Abu Dhabi.
Within months, Abedi and his coterie, many of them veterans of
United Bank, moved the headquarters to London, the leading interna¬
tional banking center. But BCCI was not really a British bank. It had
been incorporated in the Grand Duchy of Luxembourg, a tiny country
that was eager to launch itself as a financial center. Later, Abedi set up
a separate holding company in the Cayman Islands, a British colony in
the Caribbean.

Abedi had timed the founding of BCCI to perfection. Oil prices had
already begun to ratchet up. But the events of the next two years would
send them to unprecedented levels, producing a torrent of money for
the Arab oil-producing states. Most of it, of course, would have to be
deposited in banks.

The Network

On December 22, 1973, the petroleum ministers of six Middle
Eastern countries gathered in Tehran. Their host was Mohammad
Reza Pahlavi, the shah of Iran. A large contingent of reporters watched
the delegates arrive in their limousines. Until a few months earlier, few
people had heard of the Organization of Petroleum Exporting Coun¬
tries. Now the cartel was the focus of international attention: the fate
of the world’s economy was in its hands. During the two months
before this meeting, OPEC had doubled the price of oil, to $5.12 a
barrel. Another price hike seemed likely, but no one knew how big it
would be.

On the morning of December 23, the shah called a press conference
and broke the suspense. The price of oil would double once again, to
$11.65. He added, in the manner of a stern father lecturing a spend¬
thrift teenager, that it would be a good idea for people in oil-importing
countries to live a bit more frugally.

OPEC’s quadrupling of oil prices caused one of the biggest transfers
of wealth in human history. Hundreds of billions of dollars flowed into
the coffers of oil-producing states from oil-importing nations in both
the industrial and developing worlds. Commentators reached back in
time to find parallels — to Croesus or to the Spaniards’ plundering of
gold from the New World. Henry Kissinger called the price hike “one
of the pivotal events in the history of this century.”

It was far more than an economic event, for it was fraught with
political consequences. Middle Eastern potentates who had once been
ignored — or scorned — in the West were now avidly courted. Former
colonial powers like Britain and France were humbled, forced to beg

( 13 )

FALSE PROFITS

14 )

for loans and investments from the people they had once ruled. The
Arab nations had already begun to use oil as a political weapon. In
October 1973, Israel had fought its fourth war with its Arab neigh¬
bors, and Arab governments decided to punish the United States and
the Netherlands with an oil embargo because of their support for
Israel.

The first to declare an embargo against the United States was Sheikh
Zayed. Like the other Arab leaders, Zayed was bitterly opposed to the
U.S. backing of Israel. Zayed was more than a prominent supporter of
the OPEC price increases and the oil embargo. He was one of its
biggest beneficiaries. In 1970, Abu Dhabis oil revenues were $800
million; by 1975 they had soared to $8 billion.

As Zayed prospered, so did his bank; his money poured into BCCI.
What is more, Abedi assisted in the management of Zayed’s wealth,
investing it overseas. Other oil-rich Middle Easterners were also stock¬
holders and important customers of BCCI. The shareholders’ list read
almost like a Who's Who of the Middle East, including members of the
ruling families of Dubai, Sharjah, Bahrain, Saudi Arabia, and Iran.
Nowhere was BCCI’s role in catering to wealthy Middle Easterners
more noticeable than in London.

“Swinging London” conjures up images from the 1960s: Twiggy mod¬
eling miniskirts, boutiques on Carnaby Street, Beatles imitators with
mop-top haircuts. To thousands of wealthy Arabs, however, London’s
golden decade was not the sixties but the seventies. When oil prices
soared, they turned the British capital into their second home, a haven
from the summer heat of the Gulf and a place to shop, drink, and
gamble. Arab visitors rented suites at the Ritz, the Savoy, and other
posh hotels. Hospitals furnished like five-star hotels sprang up seem¬
ingly overnight, since London was a preferred place for medical treat¬
ment. Top department stores like Harrods flourished as Arab custom¬
ers swept in and scooped up everything that caught their fancy. For
them, money was no object.

One item on many shopping lists was British real estate, and the
buyers included some of BCCI’s leading shareholders. In 1975, Sheikh
Zayed bought a £300,000 (about $600,000) mansion in The Boltons,
an exclusive neighborhood in West London. That same year Kamal
Adham, the Saudi Arabian spymaster, paid £400,000 for an apartment
in Grosvenor Square across from the American Embassy.

The newly rich Arabs also needed a place to deposit their money,

The Network

( 15

and that was where BCCI came in, establishing branches in every part
of London frequented by its wealthy customers. The head office, at
100 Leadenhall Street, was in the heart of the City of London. An
office on Oxford Street was convenient to Selfridges department store
and the Dorchester Hotel. A branch on Piccadilly was across from the
Ritz. These branches were nothing like the traditional British banking
halls, which often looked as though they hadn’t seen a designer since
Victorian times. BCCI’s offices were generally of sleek design, with
marble floors, smoked glass windows, and expensive furniture. Every¬
thing exuded a spirit of enterprise, success, and modernity.

BCCI’s officers were trained to provide the ultimate in service.
Privileged clients would be picked up at Heathrow airport in a Rolls-
Royce and provided with a car and driver during their visits. They
would be entertained at elegant restaurants, nightclubs, and casinos.
The “entertainment” might also include the provision of female com¬
panions.

Thanks in part to the Arabs’ mania for London, BCCI’s British
network grew at a mind-boggling pace during the 1970s. At the end of
1973 — its first full year of operation — BCCI had 19 branches in five
countries. Of those, 8 were in the UAE, 4 in the United Kingdom. Two
years later, when BCCI had 64 branches in thirteen countries, the UAE
and the UK remained in the lead, with 19 branches each.

BCCI posted its fastest growth in Britain in 1977. The number of
UK branches rose from 29 to 45, and the British work force nearly
doubled, to 900. By the end of that year, BCCI’s global network had
grown to 121 branches in thirty-seven countries.

When BCCI set up shop in Britain, London was already well estab¬
lished as the leading international banking center. Regulation was
relatively lax as long as an institution maintained good relations with
the Bank of England. In London, there were hundreds of other banks
from all over the world to do business with. The city offered good
communications, including the largest international airport in Europe.
It was also the center of the burgeoning Eurodollar market — a vast
pool of dollars deposited outside the United States that was especially
fed by the massive surpluses of the OPEC nations.

But BCCI didn’t resemble the other foreign banks in London. One
obvious difference was its astonishing record of growth. Rival banks
found it difficult to understand how BCCI could open dozens of
branches and lend hundreds of millions of dollars in the space of a few

FALSE PROFITS

1 6 )

years and still make a profit. “People can’t understand how they make
all this money,” said an American banker. “They’ve got all these little
branches all over the place — and that must be very costly.”

When asked to account for the bank’s growth record, BCCI officials
would explain that it had much to do with the Middle Eastern connec¬
tions, suggesting that many of the petrobillionaires on BCCI’s share¬
holder list channeled deposits to BCCI. As for profitability, that was
explained by BCCI’s practice of concentrating on lucrative niches
neglected by other banks, such as catering to the needs of wealthy
Arabs. Another was the so-called ethnic market in Britain. Over the
years, thousands of Indians, Pakistanis, and Arabs, as well as ethnic
Indians from Africa, had settled in Britain. (Many ethnic Indians ex¬
pelled from Uganda by Idi Amin wound up in Britain.) These im¬
migrants needed banking services but were mostly ignored by main¬
stream British banks. This oversight offered a tremendous opportunity
to a newcomer like BCCI, which was led and staffed largely by Asians.
Outside London, there were large immigrant communities in Brad¬
ford, Edinburgh, Glasgow, Leeds, and Leicester; BCCI had branches in
each city. Many of these immigrants were active in the import-export
business, and BCCI used its connections — and its Third World
branch network — to provide trade financing.

Outside Britain, BCCI profited from the oil boom by catering to the
banking needs of migrant workers in the Persian Gulf countries. The
thousands of Pakistanis who poured into the UAE to work on con¬
struction projects during the oil boom would send a large part of their
earnings to relatives at home. BCCI’s branches in the UAE were well
positioned to handle this business. The bank employed people who
spoke the same languages as the workers and could transmit funds to
BCCI offices in Pakistan.

“I think a lot of commercial banks disdained this business,” said an
American banker with experience in the Middle East. “They didn’t
realize you could make money on retail business.” In fact, it could be
quite profitable, particularly if a bank was willing to take advantage of
its customers, this banker explained. “First of all, you clip the cus¬
tomer on the exchange rate. Then you charge him a fee for issuing the
checks. Then you get the float for about a month. If the bank is mailing
the check, then the bank could perhaps not mail the check right away.”

BCCI officials also claimed that the bank’s success was based in part
on its unique management philosophy, which they referred to as “the
Concept.” An important part of the Concept was egalitarianism.

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While other banks were run as hierarchies, BCCI played down status
and rank. There were generally no titles on business cards and there
were few private offices. In addition, decisions were supposedly made
by consensus. This corporate culture was said to foster a spirit of
harmony, inspiring each employee to work harder so that all might
prosper. The British Pakistani writer Tariq Ali once described the
Concept as “a curious, semi-mystical management philosophy” in
which “BCCFs chief executive is a committee which embodies the
bank’s ‘joint personality’ and ‘unity of thought.’ ” Another part of
BCCI’s corporate culture was its Third World identity. At every oppor¬
tunity, Abedi played up the bank as an institution owned and run by
people from developing countries. BCCI donated money to Third
World causes, including scholarships for students from developing
countries.

No one outside BCCI was really in a position to challenge these
explanations. Because the bank was a privately held institution (its
shares could not be bought on any stock market), it was not obliged to
provide detailed information to the public and it was not scrutinized
by stock market analysts. Anyone who did try to figure out BCCI by
studying its annual reports would be stymied by its complicated struc¬
ture: a maze of subsidiaries and affiliates incorporated in several differ¬
ent countries. To make matters even more confusing, there were the
two separate holding companies, one in Luxembourg and one in the
Cayman Islands.

If outsiders were unable to figure out what made BCCI tick, there
seemed to be little doubt that it was an enormously successful opera¬
tion and one with an insatiable appetite for growth. With the zeal of an
evangelist seeking souls, Abedi exhorted his employees to bring in
deposits. At the bank’s annual management conferences, said one
former officer, “the whole theme was deposits, deposits, deposits —
bring in dollar deposits.” To collect these funds, Abedi created a vast
international network.

Abedi was like a military strategist plotting the conquest of the world.
He tended to concentrate his efforts on one region at a time while
continuing to fill gaps in other parts of the world. The first two pieces
of terrain he captured were the United Arab Emirates and the United
Kingdom. As BCCI grew, he solidified its base in those countries while
planting flags elsewhere, mainly in the Third World. These outposts
took several different forms. Some were BCCI branches. Others were

FALSE PROFITS

18 )

branches of banks controlled solely by BCCI or in partnership with
other investors. Still others were merely representative offices, which
were not permitted to collect deposits or make loans.

In the Middle East, BCCI established offices in just about every
country where it was permitted to do so, including Bahrain, Lebanon,
Turkey, and North Yemen. It also set up joint venture banks in partner¬
ship with other foreign banks or local investors. National Bank of
Oman was one of the first and most important of these banks. Started
in 1973 as a joint venture with Bank of America, it eventually became
one of BCCI’s biggest units, with fifty-five branches. In Kuwait, BCCI
established a 49-percent-owned subsidiary called Kuwait Interna¬
tional Finance Company. Its chairman was Faisal Saud al-Fulaij, the
former chairman of Kuwait Airways. Fulaij also became an investor in
a series of companies and banks associated with BCCI in the United
States and other countries. Before the fall of the shah of Iran, BCCI
owned 15 percent of Iran Arab Bank, based in Tehran.

One of the biggest operations in the region was in Egypt, where a
BCCI subsidiary eventually established a network of more than twenty
branches. At its height, BCCI’s Egyptian unit reportedly collected
more than $1.2 billion from 68,000 depositors. The Egyptian unit was
just one of several on the African continent. The late 1970s and early
1980s saw a major push into Africa — both the Arab countries of
North Africa and the black African nations south of the Sahara. Dur¬
ing BCCFs first few years, Abedi swept through Africa with a vigor
that would have impressed General Erwin Rommel. In 1978, Euro¬
money, a bankers’ magazine in London, noted that BCCI was about
to launch a joint venture in Swaziland and that it “already has six
branches in Egypt, easily the most profitable of the African operations;
it also has two branches in Kenya, and a single branch in each of the
following: Ivory Coast, Sudan, Gabon, Morocco, Djibouti and Mau¬
ritius. That’s not all; there are joint ventures in Ghana and Liberia.
And in Sudan another BCCI branch is due to open this month; un¬
usual, because every other bank in the Sudan has been nationalized/’

Asia was where Abedi had begun his banking career in the 1940s, at
Pakistan’s Habib Bank. In 1978, BCCI opened its first Pakistani
branch. It later added two more branches. BCCI’s biggest Asian out¬
post was Hong Kong, the region’s leading international banking cen¬
ter. In 1979, BCCI bought 51 percent of a local institution called Hong
Kong Metropolitan Bank. BCCI later boosted its stake to nearly 100
percent and changed the name to Bank of Credit and Commerce
(Hong Kong) Limited.

The Network

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Although BCCI made much of its status as a Third World bank, it
was well represented in the industrial countries. A Canadian sub¬
sidiary was launched in 1979, and it eventually established eight
branches. In Japan, BCCI started with a representative office in Tokyo
in 1978. Four years later, it established a branch in the capital. One of
the most important BCCI operations in Europe was Banque de Com¬
merce et de Placements S.A., a joint venture in Switzerland. It was
formed in 1976 in partnership with other financial institutions, includ¬
ing one of the “big three” Swiss banks, Union Bank of Switzerland.

By the end of 1977 — after just five full years of operation — BCCI
was well on its way to becoming a global financial institution, with
146 branches in thirty-two countries. Total assets were $1.6 billion.
One year later, its total assets hit $2.2 billion, enabling it to tout itself
as the fastest growing bank in Britain and one of the fastest growing in
the world.

BCCI’s astonishing growth evoked tremendous pride among em¬
ployees, as well as devotion to the man who had made it possible,
Agha Hasan Abedi.

Abedi saw himself as an intellectual and was well read in foreign
affairs, contemporary politics, and philosophy. “He was a nut on
philosophy, a great reader of Sartre,” recalls one of his former senior
officers. Whenever an important new book came out on one of his
favorite subjects, he would be among the first to read it — and would
even quote from it, the former colleague adds. Abedi was also drawn
to the poetry of the Sufis, as Islamic mystics are known. He was fond of
private evenings with a few male friends — known as mujras — filled
with poetry reading, drinking, camaraderie, and performances by pro¬
fessional dancing girls. Drinking alcohol was, of course, un-Islamic,
but it was widely tolerated when practiced by intellectuals in such
bohemian settings.

In his private life, Abedi had suffered considerable pain. Around the
time BCCI was founded, his first wife left him under difficult circum¬
stances. The banker later married an attractive woman, Rabia, who
was much younger than he; she had been a stewardess for Pakistan In¬
ternational Airlines. Because of the traumatic end of his first marriage,
says a former associate of Abedi’s, the banker forbade Rabia from
socializing, and he himself became somewhat reclusive. They doted on
their daughter, Maha, who, having been raised in England, was more
Westernized than her parents. (For example, in 1985, when she was
eleven, she subscribed to Archie comics and twelve related titles.)

FALSE PROFITS

20 )

One of Abedi’s most striking attributes was his ability to inspire the
people who worked for him. Masihur Rahman, who was with Abedi
at United Bank before joining BCCI as chief financial officer, recalled
an incident that predated BCCI. “I and six other top aides were all
given a brown envelope containing a book. We were told to read the
book and to meditate about it.” It was Jonathan Livingston Seagull , an
inspirational book that had been a best-seller. When Rahman read it,
he recalled that Abedi said “that he would take us on magical voyages
to places we had never seen, that he would show us things we had
never seen.”

Just weeks later, at the beginning of 1972, Abedi was under house
arrest and United Bank had been nationalized by Zulfikar Ali Bhutto.
Whereas others might have sunk into despair, Abedi, mindful of the
new venture ahead, worked to reinforce his hold over former subordi¬
nates. At Abedi’s request, Rahman, who had become an adviser to
Bhutto, visited the banker. “He told me he could not sleep anymore,
because people like me had walked out of his life,” said Rahman. “It
sounds funny now, but I was touched. He talked to me about my
family, my cat, and my dog. And I asked him, ‘How do you feel about
all of this. They say you are a crook.’ He said, ‘People like you and I
will always build.’ ”

Within BCCI, Abedi was regarded as someone with little interest in
mundane details. Bank officers who went to him thinking he wanted a
two-hour presentation would often be shocked when it turned into a
two-minute exchange. In considering a country, Abedi “would ask
who the prime minister was and how long he would last,” recalls one
of his senior staffers. “Always the big-picture man.” There were,
however, exceptions. Abedi could be very finicky about physical ap¬
pearance: the design of branches, how his employees dressed and
groomed themselves. Everything had to look just right. He had expen¬
sive tastes, recalls the former BCCI officer Alberto Calvo, with a liking
for “Persian rugs, Italian shirts and ties.”

To handle the practical side of the bank, Abedi had Swaleh Naqvi.
“Arrogant, self-sacrificing, a tireless worker, the man of detail and the
administrative manager of the bank” is how Calvo characterized
Naqvi. Abedi’s deputy was always more an assistant than a director.
The quiet and relatively shy Naqvi “would try to keep up with Abedi,”
another former BCCI officer recalls, and Abedi would make encourag¬
ing remarks to try to boost Naqvi’s confidence. But though he was well
read and knowledgeable, Naqvi was not a flamboyant intellectual like

The Network ( 21

his mentor. “Abedi without Naqvi would still be the boss,” said Calvo.
“Naqvi without Abedi is nothing.”

Despite BCCI’s egalitarian rhetoric and the talk of management by
consensus, Abedi was the unquestioned ruler of BCCI. He had estab¬
lished the institution, raised the initial capital, and recruited its top
officials. Some employees were so devoted to Abedi that it was almost
as if he were the leader of a cult.

To outsiders, BCCI appeared to be a commercial bank. To insiders,
however, it resembled a secret society, with special rituals, jargon, and
lore. In many important ways, BCCI had less in common with Citi¬
bank or Barclays than it did with the Reverend Sun Myung Moon’s
Unification Church.

If Abedi was the high priest, the bankers he had brought with him
from United Bank were his disciples. Although some of his recruits
were from elite Pakistani families, many others were poor, and Abedi
gave them a chance to live a life they could never have experienced
without him. Men who had grown up in modest circumstances in one
of the world’s poorest countries were transformed into international
financiers. They bought expensive homes in the better parts of Lon¬
don, worked in tastefully appointed offices, and traveled first class.
Many BCCI managers flaunted their affluence by sporting gold chains
and Rolex watches and by gambling in the casinos of London, Monte
Carlo, and the Spanish resort of Marbella. Other international bank¬
ers were able to live like this, but there was an important difference. If
a BCCI officer lost his job, there was little likelihood that he would be
able to find an equivalent position at another major bank. Because
BCCI had a somewhat dubious reputation, there was little demand for
its alumni.

The money and perks were not the only explanation for the loyalty
of Abedi’s minions. Many employees also regarded him as a visionary
who was able to turn his dreams into reality. He had created BCCI out
of nothing and transformed it into a major force in international
finance. Employees were awed by his carefully cultivated image as an
international statesman. He circled the globe in the bank’s corporate
jet and met with world leaders. Photographs of Abedi with these
luminaries were sprinkled through the pages of BCC International , the
bank’s employee magazine. If Abedi was powerful, so the thinking
went, then BCCI was powerful and, by extension, so were the people
who worked for it.

FALSE PROFITS

Every cult has a liturgy, and BCCI was no exception. The Founding
President, as Abedi was sometimes called, delivered homilies to his
flock in the form of memoranda, letters, speeches, and articles in the
employee magazine. These were often written in a peculiar jargon — a
“BCCI-speak” — that gave them a kind of spiritual cast. To the irrev¬
erent, it sounds like pseudophilosophical mumbo-jumbo. Many em¬
ployees, however, were taken in entirely, perhaps because they wanted
to believe. A good example of BCCI-speak is an article in the October
1988 issue of BCC International , “Hope Is the Horizon.” Based on a
speech by Abedi, the article concludes:

Hope is our vehicle. Hope is the experience of my being of future
relationships. Hope is within possibility. Hope is moving into
Relationships. The territory of Hope is Totality. Who hopes?

Towards what does he hope? Into Totality — hope takes us into
possibility. Into infinite relationship — like water. Hope
is the Horizon.

The annual conferences at which Abedi expounded on his philoso¬
phy were amazing spectacles that were held in such European capitals
as Athens, Vienna, Geneva, Luxembourg, and London. Hundreds of
employees were flown in to attend — so many that BCCI typically had
to book rooms in several hotels. No expense was spared. The 1984
meeting in Vienna, for example, was held in the ornate Auersperg
Palace.

At a typical conference, the attendees would be in their seats by nine
o’clock in the morning, eagerly awaiting Abedi’s arrival. But the
Founding President was seldom on time — that was part of his mys¬
tique — and the employees might have to wait an hour or two. Abedi
would then sweep into the room, stride up to the lectern, and speak to
his flock for hours on end.

The Vienna conference lasted for three days, stretching late into the
evening each day. Abedi spoke most of that time. Only a few other top
officials of the bank, including Naqvi, were allowed to address the
throng. Speaking without a prepared text, Abedi would say little about
BCCEs business strategy and financial performance. Instead, he would
expound on his “philosophy,” talking for hours about subjects like
love and hope.

Some employees regarded this all this as gobbledygook. “He was
always preaching bullshit — this bank by the grace of God will be the
largest bank in the world, and the cosmic orientation that will flow
through the bank,” said Alvaro Lozano, a veteran American banker

The Network

( 2 3

who worked briefly for BCCI in Spain. But many other employees
were deeply touched. At the annual conferences, some of Abedi’s
acolytes would rise to their feet — like born-again Christians at a
revival meeting — burst into tears, and pledge their devotion to BCCI
and Abedi. At one conference, an employee stood up and said, “ When
I was in Pakistan, I was living in nothingness. Now I’m something.
Why? Because of BCCI.” Top managers were sometimes overcome by
emotion. On one occasion Naqvi turned to Abedi and said, “You have
moved me so much.” Naqvi then broke down and wept for twenty
minutes.

Abedi did not create BCCI single-handedly, of course. A cornerstone of
the bank’s success was his relationship with Sheikh Zayed, the onetime
Bedouin chieftain who was now one of the richest men in the world.
Like many other newly rich Arabs, Zayed spent staggering sums of
money after the oil shock. So much money was spent on construction
projects that Abu Dhabi sometimes looked like one big construction
site. Generous welfare benefits were given to citizens. Subsidies were
provided to the rulers of the other emirates, which lacked Abu Dhabi’s
wealth.

Zayed also spent freely on himself. “Better to have the problem of
spending than the problem of no money,” he once said. He built a
string of palaces in Abu Dhabi and scooped up foreign stocks, bonds,
and real estate, including a i,zoo-acre vineyard in the Champagne
region of France, a peculiar choice for a man whose religion forbids
the consumption of alcohol. He was also generous to his family — an
onerous responsibility. In the late 1970s, it was reported that he had
been married as many as fourteen times, although, of course, he pre¬
sumably never had more than four wives at one time (the limit under
Islamic law). He reportedly had twenty-two daughters and nineteen
sons. When his son Mohammed was married in 1981, Zayed treated
his countrymen to the most expensive wedding ceremony of all time,
according to The Guinness Book of World Records. The event lasted
seven days and cost $33 million — partly because a stadium for
20,000 people was built just for the occasion.

In spite of his profligate ways, Zayed had plenty of money left over
to support BCCI’s growth with large deposits. In 1978, a U.S. bank
examiner found that BCCI’s deposits came mainly from the UAE.
Much of that money would have come from Zayed personally, his
relatives, and government entities that he controlled.

Abedi well understood the importance of Zayed’s backing, and he

FALSE PROFITS

2 4 )

went to extraordinary lengths to cater to the sheikh and to other VIPs
in the emirates. Zafar Iqbal, one of Abedi’s chief lieutenants, was
stationed in Abu Dhabi, and one of his principal duties was to keep
Zayed happy. Bashir Tahir was responsible for attending to the needs
of Sheikh Rashid bin Said al-Maktoum, who ruled Dubai — the sec¬
ond most important sheikhdom in the UAE — until his death in 1990.
These BCCI officials were so effective that they became confidants of
the rulers and their families. Tahir, said a former BCCI official, “was
adopted almost as a son” by Sheikh Rashid.

Zafar Iqbal spent far more time at Sheikh Zayed’s palaces than he
did at the BCCI office. A typical day might be spent with Zayed’s son
Sheikh Khalifa, the crown prince. “Sheikh Khalifa would get up at
about midday,” said a former BCCI official. “By that time, hangers-on
would be sitting in his office,” including middlemen representing for¬
eign companies that wanted to do business in Abu Dhabi. “They
would see Zafar Iqbal. Khalifa would have his breakfast at one in the
afternoon.” A few hours later, he would take his siesta, and Iqbal
would go to his BCCI office, perhaps to return a phone call from
Abedi. “Then he would go back to Khalifa, who might have a majlis *
in the evening until about ten or ten-thirty. Iqbal would have dinner
with him and he would go home.”

Zayed would typically spend his time praying or listening to news,
recalled Akbar Bilgrami, a former BCCI official who looked after some
of Zayed’s investments. “He had a court jester-type person who made
him laugh and told him poetry. He was a simple man, simple but
shrewd.”

When Zayed and Rashid traveled abroad, a BCCI man nearly al¬
ways went along to attend to personal financial chores and other
details. Bilgrami has described a two-week visit to Spain when Zayed
arrived with two planeloads of 150 hangers-on, including relatives and
servants. “The sheikh is a sort of father figure,” said the banker. “It is
hard for him to say no to people, especially because he knows that
everybody knows that he has the money.” To ensure a handy supply of
gifts, Zayed “would carry about a briefcase filled with expensive
watches — Cartiers, Rolexes.” During the Spanish trip, Bilgrami was
responsible for paying all of the bills — which amounted to $20 mil¬
lion. Zayed, according to the banker, “only spent $400 on himself the
entire trip for two dogs, whose price he negotiated down from

In a majlis , citizens can air grievances and make requests to the ruling family.

The Network

( 2 5

$1,000.” Bilgrami joined Zayed’s entourage, lugging two large suit¬
cases containing as much as $5 million in cash. “I was like a mobile
bank.”

BCCI also helped manage and invest Zayed’s wealth. Abedi ordered
BCCI officers to set up a number of front companies for the ruler. Like
other Middle Eastern potentates, he wanted to conceal his wealth and
accumulate a nest egg abroad in the event of political turbulence at
home.

The first company, Associated Shipping Services Ltd., was estab¬
lished in 1975 as a personal service company. Run by BCCI in all
respects, it arranged limousines, travel, and cash transactions for Za-
yed and his associates. A nephew of Abedi’s, Qamar Rizvi, helped set
up the company and served as one of its major shareholders.

Other companies soon followed. Through the Hilal Foundation
(hilal is Arabic for “the crescent moon”), Progressive Investment Com¬
pany of Liechtenstein, and Bruna S.A., Akbar Bilgrami bought and
managed millions of dollars worth of property in Spain, including a
string of villas in Marbella. These villas, which were acquired by Bruna
S.A. from the Fiores family in 1977, took care of some of Zayed’s
vacation needs. For the health of his family, he wanted to invest in
some good medical care, so BCCI arranged for the construction of
London’s Cromwell Hospital. In 1978, Zayed’s personal office, with
the help of BCCI, set up Resal Investment Grand Cayman Ltd. to hold
Zayed’s investments in the hospital. BCCI also helped Zayed acquire
valuable property in London’s tony Regent’s Park area.

Ownership was always carefully hidden. The Resal company in the
Cayman Islands was in turn owned by a Liechtenstein entity, the Resal
Foundation. The foundation was controlled by Sheikh Zayed, his son
Khalifa, three trusted acolytes, and a lawyer from Liechtenstein. Abedi
also set up Transocean Shipping Ltd., a shipping concern, for Zayed.
Although the company was incorporated in London, its two main
shareholders — Caminos Transoceanicos Naviera S.A. and Destinos
Transoceanicos Navigacion — were shell companies based in Panama.

Thanks to BCCI’s close relationship with Zayed, the bank’s opera¬
tions in the UAE were given privileged treatment. After the 1973 oil
shock, foreign and domestic banks hoping to cash in on the petrodol¬
lar boom opened hundreds of branches in the UAE, making it one of
the most overbanked countries in the world. By 1979, according to
one estimate, the UAE had 430 bank branches, or one for every 2,000
citizens, the highest ratio in the world. In 1982, the UAE government

FALSE PROFITS

26 )

ruled that foreign banks would be restricted to eight branches apiece.
Abedi got around the limit through the simple stratagem of setting up
a new, “local” bank, Bank of Credit and Commerce (Emirates). BCCE,
established in January 1983, acquired BCCFs “excess” branches. This
transparent attempt to evade the limit was attacked by some bankers
as “immoral,” but they could do nothing about it. After all, Sheikh
Zayed and other UAE officials were major shareholders in both BCCI
and BCCE.

Although BCCI seemed to be an unqualified success, there was trouble
brewing — inside and outside. One internal problem was factionalism.
The top managers were split between two camps: the technocrats and
the Gulf faction. The technocrats — experienced, Westernized bank¬
ers — were led by Swaleh Naqvi, Abedi’s deputy. The Gulf faction
consisted of officials working in the UAE and other Arab countries
where BCCFs shareholders lived. This group was led by Zafar Iqbal,
BCCFs top official in Abu Dhabi. Each group claimed credit for
BCCFs success. The technocrats felt the bank would never have grown
so rapidly without their skill and experience. Members of the Gulf
faction, said a former official, “claimed that they were the ones who
made the bank because of their access to the Arabs.”

There was also an ethnic and religious dimension to the fac¬
tionalism. As a former official explained, “Abedi was an Indian im¬
migrant to Pakistan, Urdu-speaking and of the Shi’ite religion.” Many
of the technocrats came from the same background. By contrast, the
Gulf faction was dominated by men who had grown up in the Punjab
region of Pakistan and belonged to the Sunni branch of Islam. (Abedi
did not plan it; it just happened that way in BCCFs clannish atmos¬
phere.) The tension was palpable at BCCFs annual management con¬
ferences. Each faction stayed in a different hotel and sat apart during
the proceedings. “They would never socialize,” a former BCCI official
said. “They would not even acknowledge [each other]. They would
not even shake hands.”

Outside BCCI, bankers and bank regulators were beginning to ask
tough questions about Abedi’s institution. Euromoney noted in 1978
that BCCI “is the talking point at bankers’ cocktail parties, the source
of gossip at conferences, and the object of speculation in the first-class
cabins of planes ferrying bankers out to the Gulf.”

Questions about the bank’s profitability persisted in spite of BCCI
officials’ talk about lucrative niches and their unique management

The Network

( 2.7

style. A British banker with extensive experience in many of the Third
World countries where BCCI was active said, “They seem to be able to
get a return on assets far greater than all the other [foreign] banks
[even though] they pay their staff more and they don’t have a more
efficient way of operating. It’s clear they have some means of operating
different than other banks.” Said a former BCCI official: “One thing is
for damn sure — this bank makes lots of money and nobody knows
how.”

BCCI’s ownership was also a mystery. There seemed to be no ques¬
tion that the biggest shareholders were Sheikh Zayed, associates of his,
and Bank of America. But where did the rest of the money come from?
Part of the answer lay in a strange entity in the Cayman Islands called
International Credit & Investment Co. Ltd. (ICIC). Speaking a few
years after the founding of the bank, Abedi said that BCCI had “about
thirty or so” shareholders, with only ICIC holding a larger share than
Bank of America. Together, these two shareholders held close to three-
quarters of the stock, Abedi said, meaning that ICIC held about half
the bank’s stock. “The remaining stock,” Abedi said, “is owned by
twenty-five to thirty investors,” who were “individuals from the Mid¬
dle East.” The most prominent one was apparently Sheikh Zayed,
who, according to one newspaper account from the 1970s, subscribed
to 20 percent of the bank’s capital at its formation. Many of the others
were relatives or associates of Zayed’s, who depended on the sheikh
for funds.

Abedi’s vague statements about BCCI’s ownership aroused suspi¬
cions that some of the rich Arab stockholders were simply nominees,
especially because the use of fronts and nominees is widespread in the
Middle East. Members of the ruling elites do not want others to know
how much wealth they have accumulated.

Questions were also raised about BCCI’s manner of doing business.
The bank’s extremely rapid growth began to cause concern in the
financial community and among bank regulators.

A bank is not like a retailer. If a supermarket’s sales rise, it is a good
sign. If a bank grows very fast, that means it is lending more and more
money each year, and every loan is a potential time bomb: Will the
loan be repaid on time or will the borrower default? In BCCI’s case,
concerns about the quality of its loan portfolio were especially valid,
since the bank’s roots were in countries where modern concepts of
banking and finance were alien.

FALSE PROFITS

^8 )

In the more traditional parts of the Middle East, such as Abu Dhabi,
the very notion of banking is inimical to many Muslims. Fundamen¬
talists generally cite the famous prohibitions against riba , as usury and
interest are termed in Arabic, in the Muslim holy book, the Qu’ran.
Other passages in the Qu’ran seem to support the payment of interest,
but they have done little to restrain a strong Muslim tradition against
such payment. This has caused great difficulties for Western banking in
traditional Muslim countries, as the collection of interest may not be
enforceable in court.

Pakistan had a longer banking tradition than many Arab countries,
but modern financial concepts had not really taken hold. Far more
important was the borrower’s status in the community and his per¬
sonal relationship to the banker.

One Pakistani business group with close ties to Abedi was the Gulf
Group, controlled by the Gokal family. The Gokals were international
shipping magnates, and they became important customers of United
Bank. When Abedi established BCCI, he brought in the Gokals as
clients. BCCI lent increasingly large sums to the Gokals during the
1970s, even though the shipping industry is notoriously cyclical. The
carrier trade to developing nations and the tanker business both went
into a nosedive in the latter part of the decade, causing big problems
for the Gokals. Instead of cutting his losses and turning off the spigot,
Abedi continued lending to his friends. In so doing, he tied BCCI’s fate
ever more closely to that of the Gokals.

Abedi had no intention of curbing BCCI’s lending or cutting back on
the growth of its branch network. In Britain, where BCCI had forty-
five offices, Abedi wanted hundreds. In January 1978, the Sunday
Times of London reported that “BCCI will open five more branches by
the end of next month and has plans for another 150 in the next two or
three years.” The Bank of England was not at all comfortable with
these plans and made it clear to Abedi that if he wanted to open more
branches, they would have to be in some other country. The British
central bank ordered BCCI to freeze its UK branch network at forty-
five.

Another setback came in October 1979, when Britain’s Banking Act
took effect. Under that law, every bank doing business in Britain was
either given “recognised bank” status or classified as a “licenced de¬
posit-taker.” BCCI was relegated to the second-class status of a li¬
censed deposit-taker — forbidden to call itself simply a bank — in
spite of its large presence. (Britain’s banking legislation was later

The Network

( 2.9

changed, with all banks given equal status.) Abedi complained bitterly
to the Bank of England, and his minions blamed it on “racism” in the
City of London. If BCCI was being treated as a second-class citizen, it
was because the financial establishment could not tolerate a successful
Third World bank. As Abedi said in 1978, “It is not only the Bank of
England that is against us, but the Club.”

Bank regulators and jealous competitors, however, weren’t the only
ones who had concerns about BCCI. So did one of BCCI’s largest
shareholders, Bank of America. When the California bank agreed to
become a founding shareholder in BCCI, it was a major coup for
Abedi. Its participation gave Abedi’s venture a measure of credibility
and respectability. Over the years, however, Bank of America officials
became nervous about BCCI’s extraordinary growth and its question¬
able banking practices.

B of A auditors found that there was a high degree of concentration
of lending. In the United States, nationally chartered banks were for¬
bidden to lend more than 10 percent of capital and reserves to a single
borrower. BCCI’s loans to the Gokals’ Gulf Group far exceeded that
figure. Other concerns included large loans to insiders (directors, offi¬
cers, and shareholders), inadequate loan-loss provisions, and lax inter¬
nal controls. According to one (perhaps apocryphal) story, B of A
auditors were once sent to check on a BCCI branch in the UAE. When
they arrived, they discovered that the branch did not exist.

Bank of America gradually began to distance itself from BCCI. In
1976, it asked Abedi to remove its logo from BCCI’s letterhead. That
same year, it refused to contribute new capital to finance BCCI’s ex¬
pansion because it was alarmed by the rapid growth of BCCI’s assets.
In August 1977, Euromoney reported that Bank of America was
thinking of selling its BCCI stock. “Subsequently,” the magazine later
said, “a representative from BCCI, Dildar Rizvi, visited Euromoney's
London headquarters to complain about what he termed the inaccu¬
racy of the report. Rizvi claimed that Bank of America planned to
retain its shareholding in the bank, and that it was very happy to do so.
Bank of America confirmed that statement. Some months later, how¬
ever, Bank of America issued a press notice, following a number of
stories in the financial press, which said that it intended to divest itself
of its interest in BCCI by 1980.”

Bank of America’s press release, issued in January 1978, stated that
it would be selling its BCCI stock to another major shareholder “over
the next 2 1/2 years” because “BCCI is now a fully fledged global
bank” and because B of A “is currently increasing its direct presence in

FALSE PROFITS

3 ° )

the Middle East.” The buyer, according to Abedi’s deputy Swaleh
Naqvi, was the ICIC Staff Benefit Fund. B of A completed the divesti¬
ture in July 1980.

Few people in the financial community believed the official explana¬
tion of the pullout. The general assumption was that BCCI was a
dubious outfit — a “cowboy” operation, as some British bankers put
it — and Bank of America was fearful of being tainted. But the Califor¬
nia bank did not sever all its ties with BCCI. It remained a joint venture
partner with BCCI in National Bank of Oman and served as one of
BCCIs main correspondent banks in the United States.

The setbacks with the Bank of England and Bank of America did
nothing to dampen Abedi’s obsession with growth. One former official
said of BCCI’s top officers, “Their objective — and they said so
openly — was to become the largest bank in the world by the year
2000.”

No banker with Abedi’s ambitions could ignore the United States,
the world’s biggest economy and the seat of vast political power. It was
also the country of the dollar, and BCCI’s balance sheet was expressed
in dollars. The United States was also alluring for cultural and emo¬
tional reasons. BCCI was a bank with a strong immigrant culture.
America, of course, is the land of immigrants.

Abedi not only wanted to expand into the United States, he even
dreamed of transforming BCCI into an American bank one day. Sani
Ahmed, a BCCI officer who served as head of the bank’s Washington,
D.C., representative office, said, “Mr. Abedi told me four times, ‘Our
aims in the United States are very ambitious.’ He wanted at least five
hundred branches. We thought we would shift our headquarters
there.”

Abedi made the first important steps toward fulfilling this dream by
arranging for a group of BCCI clients to buy stock in one of the most
important banking institutions in the U.S. capital. In doing so, he
touched off one of the biggest, most acrimonious, and most protracted
takeover battles in American corporate history, attracting worldwide
attention to BCCI. When it was over, Abedi emerged with far greater
financial and political clout than ever before.

It all began in the fall of 1977, when Abedi met a banker from
Georgia who happened to be the best friend of the president of the
United States. His name was T. Bertram (“Bert”) Lance.

Coming to America

It’s hard to imagine a more unlikely pair than Agha Hasan
Abedi and Bert Lance. While Abedi appeared refined and cultivated,
Lance was almost the stereotype of the southern “good oL boy.” There
was also a striking physical contrast. Abedi had an average build, but
the Georgia banker was a bear of a man, weighing 240 pounds and
standing six feet four inches tall. However, Lance and Abedi also had
much in common. They both had a knack for making political connec¬
tions and they both played fast and loose with banking regulations.
These two characteristics were related: both men used their banks to
acquire political clout.

Lance was born on June 3, 1931, in the rural community of Young
Harris, Georgia. In 1950, he dropped out of college to marry his
childhood sweetheart, LaBelle David, then worked as a teller at Cal¬
houn First National Bank, which had been founded by LaBelle’s
grandfather. Seven years later, Lance and a group of investors bought
control of the bank, and he ultimately became its chairman. One of the
most popular men in town, Lance was utterly unlike the image of the
conservative banker. Friends and neighbors found him an easy touch,
and he lent liberally to himself and his relatives as well.

In 1966, Lance made the most important political connection of his
life when he met a dynamic young Georgia politician, James Earl
Carter, Jr., known to everyone as Jimmy. At the time, Carter was a
state senator running for the governorship. Lance became an impor¬
tant campaign supporter and contributor. They eventually became
best friends; Carter has likened Lance to a brother. Although Carter
lost in 1966, he won four years later, thanks, in part, to Lance’s help.

( 3 1 )

3 2 . ) FALSE PROFITS

After he took office, he appointed Lance to the post of highway com¬
missioner.

Lance enjoyed his stint in state government and made an unsuccess¬
ful bid for the Democratic nomination for governor in 1974 as Carter’s
chosen successor. It was later discovered that Lance’s campaign com¬
mittees wrote hundreds of bad checks against accounts at Calhoun
First National and that the bank cleared them.

Although Lance failed to gain higher political office, his career as a
banker flourished when he was recruited by Financial General Bank-
shares (FGB), a bank holding company based in Washington, D.C.
FGB was an unusual institution. Although the McFadden Act forbade
American banks to engage in interstate banking, FGB had been
granted a special exemption and owned banks in several states. In
most cases, it held a majority of the stock, with local investors owning
the rest.

In January 1975, Lance became president of National Bank of Geor¬
gia (NBG), FGB’s subsidiary in Atlanta. Five months later, he and a
group of investors bought control of the bank from FGB and he was
named chairman. As head of NBG, Lance became friendly with one of
the most important financiers in the South, Jackson T. Stephens, the
president and a controlling shareholder of Stephens Inc. of Little Rock,
Arkansas, one of the largest brokerage firms in the country.

Lance and Stephens met in 1975. L was around that time that
Stephens Inc. managed a public offering of NBG stock. “Their com¬
mon interests, one acquaintance said, were Jimmy Carter — a Naval
Academy classmate of Stephens’s — banking, money, religion -— both
Southern Baptists — and Democratic politics,” a reporter noted later.
(Stephens would say that although he had met Carter at the Naval
Academy, they did not become well acquainted until later in life.) In
the 1976 presidential race, Stephens and Lance both assisted Jimmy
Carter.

Not only was Lance a contributor to Carter in 1976, his bank was
the biggest single lender to the Carter family’s peanut warehouse busi¬
ness; the debt to NBG reached as high as $4.7 million. It was later
alleged that these loans amounted to de facto financing of the presiden¬
tial campaign — which would have been illegal. (After an investiga¬
tion, Carter was cleared of wrongdoing.) Lance also let the Carter
campaign use NBG’s corporate plane without disclosing it as a contri¬
bution; the campaign was fined for this violation.

Coming to America ( 3 3

After Carter was elected president, he brought Lance to Washington
as director of the Office of Management and Budget, one of the most
important posts in the federal government. Lance’s dubious financial
practices did not cause a problem when he was up for Senate con¬
firmation, for federal officials had withheld important information
about his activities from Senate investigators. A handful of journal¬
ists — notably the New York Times columnist William Safire — began
to dig into Lance’s background and uncovered a number of apparent
irregularities. It seemed that Lance had financed his purchase of NBG
stock with loans from two big New York banks — Manufacturers
Hanover Trust Company and Chemical Bank — and had then ar¬
ranged for NBG to open correspondent banking accounts with them.
In one column, Safire suggested that Lance received a $3.4 million loan
from the First National Bank of Chicago not because of his creditwor¬
thiness but because of his closeness to Carter. This loan, according to
Safire, enabled First Chicago’s chairman, A. Robert Abboud, “to gain
life-and-death financial control over the man closest to the President.”
(Abboud denied favoritism.)

In July 1977, the Senate Governmental Affairs Committee, chaired
by Abraham Ribicoff, a Connecticut Democrat, looked into Lance’s
conduct and cleared him of wrongdoing. But Ribicoff acted too soon.
More allegations of misconduct emerged almost daily, engulfing the
Carter administration in its first major scandal, Lancegate. On August
18, the Office of the Comptroller of the Currency — the main regula¬
tor of nationally chartered banks — issued a report criticizing Lance’s
banking practices. Since the report did not accuse Lance of breaking
the law, Carter treated it as an exoneration of his friend; at a press con¬
ference with Lance, the president made a remark that later came back
to haunt him: “Bert, I’m proud of you.” Nonetheless, Ribicoff an¬
nounced that his committee would be holding new hearings on Lance.

In the meantime, there was growing pressure on Carter to fire his
friend. On September 5, Labor Day, Carter met with Ribicoff and
Charles Percy of Illinois, the ranking Republican on the committee,
and the senators asked the president to dismiss his budget director.
Lance turned for help to Clark Clifford, one of the most respected —
and politically well-connected — lawyers in Washington. Clifford per¬
suaded the committee to postpone Lance’s testimony to give the
banker more time to prepare.

The nationally televised hearings began with a parade of witnesses
who recounted Lance’s dubious financial practices. Lance defended

FALSE PROFITS

34 )

himself on September 15 in a two-hour statement in which he lashed
out at the committee for treating him unfairly. It was an impressive
performance, winning him applause at the end. Hedrick Smith of the
New York Times observed: “For the moment, he managed not only to
push Senator Percy into regretful apologies about news leaks and mis¬
interpretations, but also to win predictions from some members of the
Senate committee that there would be ‘a backlash of sympathy.’ ”
Despite the rave reviews, Carter was unable to resist the pressure to
fire Lance and on September 21 accepted his resignation with “regret
and sorrow.”

The resignation was by no means the end of Lance’s woes. He was
the target of investigations by bank regulators and federal prosecutors,
which led to an indictment in May 1979 on charges of violating federal
banking laws. Clark Clifford’s protege, Robert A. Altman, assisted
Lance’s defense team. A year later, the trial ended in a hung jury.*

On top of his legal troubles, Lance was in desperate financial straits.
Around the time of his resignation, he was more than $5 million in
debt, and the value of his biggest asset — his stock in National Bank of
Georgia — had plummeted. His only hope was to sell the stock at well
above the market price.

Hope soon arrived in the person of Agha Hasan Abedi.

Abedi was eager to expand in the United States. Although he could
open BCCI branches, he realized that the quickest route to growth
would be through an acquisition. But there were several obstacles. One
was the McFadden Act banning interstate banking. BCCI was affected
because Bank of America owned a large chunk of its stock. Thus, if
BCCI wanted to buy a bank in any state other than California (B of A’s
home), regulators would think B of A was trying to circumvent the N
law. Even though B of A was planning to dispose of its stock, Abedi

*A few years after that, the incorrigible Lance was in trouble again. In August 1985,
the Office of the Comptroller of the Currency (OCC) charged him with a series of offenses.
The agency alleged that he had engaged in check kiting, had received proceeds of nominee
loans from Calhoun First National Bank, and had obtained a payment from the bank’s
credit life insurance company that was owed to the bank.

The Lancegate affair finally concluded in February 1986. In a settlement with the OCC,
Lance agreed to pay a $50,000 civil fine to the U.S. Treasury. He was also barred from
serving as an employee, officer, or director of — or otherwise participating in the affairs
of— any federally insured bank without the written permission of the appropriate banking
agencies.

The story ended on a farcical note. Lance, according to the columnist Jack Anderson,
paid the $50,000 fine with a rubber check. The hapless banker eventually made good.

Coming to America ( 3 5

would likely encounter opposition from regulators who were nervous
about BCCI’s rapid growth and its dubious banking practices.

One way around these obstacles would be for a BCCI client to take
over an American bank. The first such attempt was made by a member
of the Gokal family that controlled the Gulf Group, the shipping
empire that Abedi had supported for years. In 1975, Abbas Gokal
made an offer for Chelsea National Bank, a small institution in Man¬
hattan, and the owners agreed to sell it to him. Before the deal could go
through, the New York State Banking Department had to give its
approval.

When the New York regulators checked into Gokal, they were far
from impressed. John Heimann, then New York State banking super¬
intendent, later said, “His uncertified financial statement showed total
assets of $4.5 million, of which $3 million was in the form of a loan
from his sister. His reported annual income for the prior year was, as I
recall, approximately $34,000.” The regulators also found that Gokal
had no banking experience — but very close ties to BCCI. When Gokal
negotiated with Chelsea’s owners, he was advised and represented by
BCCI. In a statement filed with the regulators in 1976, Gokal said he
had been advised by Abdus Sami, a senior BCCI executive. In October,
Gokal told the regulators that BCCI would help him run the New York
bank. One regulator’s notes of that meeting state: “Sami is to spin off
management from Bank of Credit and Commerce to manage Chelsea
(new information).”

This prompted the regulators to take a close look at BCCI, and they
did not like what they saw. Heimann found that the BCCI group was
structured in such a way that no single central bank or regulatory
authority had primary responsibility for overseeing it. As Heimann
and his staff dug further, they became increasingly alarmed. When they
asked BCCI for details about large, unsecured loans to certain Arab
customers, for example, the response typically was dismissive: “It’s
private.” Because of their wariness about BCCI’s role, the regulators
told Gokal’s lawyer that his answers were unsatisfactory. Chelsea
National was sold to someone else.

Around the time that Gokal was trying to buy Chelsea National,
BCCI officials were looking at another New York bank, Bank of
Commerce, which was controlled by FGB, the same company that
spun off NBG to Bert Lance. Abdus Sami also worked on this deal.
Abedi and Sami met with FGB’s controlling shareholder, the retired
army general George Olmsted, and William Schuiling, FGB’s chairman
and CEO. Schuiling later said he had not been very impressed with

FALSE PROFITS

36 )

Abedi. The BCCI chief “was not the type of banker that I would care to
be associated with. I doubted his judgment, and I went in to see Gen¬
eral Olmsted and told him, maybe he can work with the Bank of Amer¬
ica, but as far as I am concerned I do not wish to be associated with Mr.
Abedi.” One of Schuiling’s former colleagues says that the American
banker was much more blunt in private. (The former colleague says
Schuiling pronounced the name “Ah-&ee-dee” rather than “Ah- buh-
dee,” the correct pronunciation.) “I threw Ah-bee-dee out of my office
when he tried to buy Bank of Commerce back in the seventies,”
Schuiling growled. He then muttered, “Bunch of unsavory people.”

In late 1977, after meeting Bert Lance, Abedi finally succeeded in
putting together a U.S. takeover.

The matchmaker was R. Eugene Holley, the former majority (Demo¬
cratic) leader of the Georgia senate and a friend of Lance’s. Holley was
more than a local politician; he was involved in a Middle Eastern oil
venture. In 1975, the evangelist Oral Roberts had introduced Holley
to Roy J. Carver, the multimillionaire chairman of Bandag Inc., a big
tire retreading company. Holley and Carver soon became involved in a
project to develop an offshore oil concession granted by the govern¬
ment of Qatar.

Shortly before Lance’s resignation, Holley visited London in an
effort to obtain financing to develop the oil concession. One of the
banks he called on was BCCI. Holley was not afraid to drop names,
so he mentioned to a BCCI banker that Bert Lance happened to be
his good friend. In case the banker didn’t appreciate the significance
of this, Holley told him that Lance was a close friend of President
Jimmy Carter’s. “On hearing of his presidential contact, the BCCI
banker takes him straight to Mr. Abedi,” according to a former BCCI
official.

Abedi quickly agreed to help the stranger who said he was a friend
of a friend of the president’s and arranged for Holley to see executives
of Attock Oil, a company in London associated with BCCI.* In the

*In spite of BCCFs assistance, Holley and Carver ran into trouble in Qatar when the
government refused to renew their oil concession. In March 1978, the two men visited
Qatar, and Carver complained to the U.S. ambassador that they were losing the concession
even though he had paid a $1.5 million bribe to a Qatari official. The ambassador reported
the conversation to the Justice Department. In April 1979, Carver earned the distinction of
being the first person charged with violating the Foreign Corrupt Practices Act, which
makes it illegal for Americans to bribe foreign officials. Carver agreed not to contest the
charges and was enjoined from bribing foreign officials in the future. (Carver died in June
1981.)

Corning to America ( 37

course of the meeting, said the BCCI source, Holley mentioned “that
his banker friend [Lance] will be leaving the government and want[s]
to sell his bank and may also be in the market for a loan for a couple of
million dollars.” Abedi was interested.

Lance and Abedi met for the first time in early October, according to
Lance, at the Waldorf-Astoria Hotel in New York. (Abedi has said that
the first meeting was actually in London.) They met again on October
15 at a hotel in Washington, D.C. The two bankers had a strong
mutual attraction. Lance wanted to get out of his financial mess by
selling his National Bank of Georgia stock and refinancing his debts.
Abedi wanted to expand into the United States. Perhaps even more
important to Abedi was the chance to use Lance as a bridge to the
American political world. Shortly after the meeting in Washington,
Abedi hired Lance as a business consultant, to spot investment oppor¬
tunities for BCCI.

At the time, there were about fifteen thousand banks in the United
States, some of which were undoubtedly attractive prospects. Lance,
however, recommended an ailing bank that was the target of a great
deal of regulatory scrutiny, National Bank of Georgia. NBG’s woes did
not seem to bother Abedi, and he was soon involved in serious discus¬
sions with Lance and his investment banker friend, Jackson Stephens.

Despite Abedi’s enthusiasm, there was little chance that a takeover
by BCCI would be approved by U.S. bank regulators, but Abedi
quickly found a solution. He arranged for NBG to be purchased by
Ghaith Rashad Pharaon, a Saudi Arabian tycoon and BCCI client who
was reputed to be one of the richest men in the world.

When Pharaon appeared on the American scene in the 1970s, the only
other well-known Saudi businessman was Adnan Khashoggi, the flam¬
boyant arms dealer who had been implicated in the Lockheed bribery
scandal a few years earlier and would figure in the Iran-contra affair of
the 1980s. In his well-tailored suits and Vandyke beard, Pharaon
appeared to be much less vulgar than Khashoggi. Pharaon’s aides
pointed out discreetly that their boss had a Ph.D. from the Harvard
Business School — a not very subtle reminder that Khashoggi was a
college dropout.

Pharaon’s Harvard degree was actually an M.B.A., but few people
bothered to check. Former associates explain that Pharaon favored the
title “doctor” because it was used by men like Henry Kissinger and
Armand Hammer, although they, of course, had earned their degrees.
(Pharaon’s lawyer says that the term was intended simply as an hon-

FALSE PROFITS

38 )

orific.) The Saudi businessman also liked to show off his art collection.
Once, when a visitor to his office in Paris admired a full-length por¬
trait, Pharaon gestured at it with his cigar and said, “It’s Philip of
Spain. It’s by Titian, by the way.” Later, the visitor learned that the
picture had not been painted by the seventeenth-century Venetian
master at all but by some anonymous copyist. One clue that should
have alerted the visitor was Pharaon’s failure to install a burglar alarm
to protect the allegedly priceless artwork.

An additional deception was Pharaon’s attempt to portray himself
as an entrepreneur whose success was based on training and skill. In
fact, Pharaon owed a great deal to friends in high places. His father —
like Khashoggi’s — had been a personal physician and top adviser to
the late King Faisal. Pharaon’s flagship company, Saudi Research &
Development Corporation (REDEC), had been launched in 1966 in
partnership with two of King Faisal’s sons, Prince Abdullah and Prince
Mohammed. (Pharaon later bought them out.) Over the years, Pha¬
raon made a fortune by acting as a middleman on behalf of foreign
companies doing business in Saudi Arabia.

There is some dispute about when Abedi and Pharaon met. Pharaon
has claimed that it was in the late 1970s in Cairo. Other sources,
however, say the relationship began much earlier, before BCCI was
founded. A former BCCI officer says the introduction was made by
Pakistan’s Saigol family, which controlled the bank Abedi ran before
founding BCCI. The Saigols had struck up a partnership with Pharaon
“in a construction and trading company,” said one source, and Abedi
cemented the relationship by lending money to a hotel project in
Jiddah, Saudi Arabia.

Pharaon eventually emerged as one of Abedi’s closest associates,
serving as a bridge to other important Saudis, including his partner in
the Jiddah hotel project, Kamal Adham, a brother-in-law of King
Faisal’s as well as the head of Saudi Arabia’s intelligence agency. Sev¬
eral of these Saudi contacts became BCCI shareholders, enhancing the
credibility of the bank. Pharaon invested in it (for a time he was one of
the biggest single shareholders), as did Adham and Adham’s nephew
Prince Turki bin Faisal al-Saud. Considered the brightest of King
Faisal’s seven sons, Prince Turki became deputy director general of
intelligence in 1973, at the age of twenty-six. He succeeded Adham as
the country’s intelligence chief in September 1977.

Of all Abedi’s clients, Pharaon seemed to be the one most suitable
for the National Bank of Georgia deal since he had already passed

Coming to America ( 39

muster twice with U.S. bank regulators when he invested in banks in
Houston and Detroit. Toward the end of 1977, Pharaon agreed to buy
Lance’s 60 percent stake in NBG for $2.4 million, which worked out to
$20 a share. A few weeks earlier, the stock had been trading for about
$10 a share. (Pharaon later acquired all of NBG.)

The deal was a tremendous boon to Lance, of course, who had been
teetering on the brink of bankruptcy. Lance and Pharaon portrayed the
deal as a routine investment, but skepticism abounded. Of the thou¬
sands of banks in the United States, it seemed odd that Pharaon
happened to choose one that was owned by a close friend, political
supporter, and lender to President Carter — and that he would pay top
dollar for it. Charges arose that “the Arabs” were trying to buy
influence with powerful Americans. The controversy surrounding the
NBG deal, however, would pale by comparison with what was in the
works: a bid for one of the biggest banking companies in the nation’s
capital, Financial General Bankshares.

If Lance could engineer a takeover of FGB with Abedi’s help, he
could return to Washington in style, installing himself as chairman or
president, and thus recover from the humiliation of Lancegate. Not the
least of FGB’s attractions was the company’s headquarters at 17th
Street and Pennsylvania Avenue, with an impressive view of the White
House.

FGB traced its roots to the Morris Plan, a pioneering consumer-lend¬
ing business. Arthur Morris, its founder, began his banking career
around the turn of the century by making small installment loans to
working people — a practice virtually unknown at the time. In 1910,
he established the first Morris Plan bank: Fidelity Loan & Trust Com¬
pany of Norfolk, Virginia. Within ten years, Morris Plan banks were
operating in many states. In the 1940s and 1950s, the company be¬
came a financial conglomerate, with interests in such areas as in¬
surance and mortgage banking. It was also exempt from the federal
ban on interstate banking, as noted earlier. In 1977, FGB controlled
banks in Maryland, New York, Tennessee, Virginia, and the District of
Columbia.

General George Olmsted controlled FGB through a company called
International Bank and various other entities. The Federal Reserve
Board said this setup was illegal. International Bank, according to the
Fed, was a bank holding company. It therefore could not simulta¬
neously own FGB and certain other businesses not related to banking,

FALSE PROFITS

40 )

such as an insurance company. So the Fed ordered International Bank
and its officers and directors to dispose of large chunks of FGB stock.
One potential buyer was Bert Lance, who was quite familiar with FGB
since it had hired him to run its Georgia bank in 1975 and had then
sold a controlling interest in it to an investment group led by Lance. In
the fall of 1976, Olmsted offered to sell his FGB stock to Lance, but the
Georgian turned him down, presumably because this would have
prevented him from serving in the Carter administration.

The following April, Olmsted sold about 22 percent of FGB’s voting
stock to a group of some twenty investors led by J. William Midden-
dorf II, a former investment banker who had served as the secretary of
the navy under Presidents Nixon and Ford. Middendorf also received
proxies for FGB stock from Olmsted and from another leading stock¬
holder, the Washington real estate magnate Eugene B. Casey.

Lance’s friend Jackson Stephens, the investment banker, was one of
the biggest investors in the Middendorf group. Other major investors
included Armand Hammer, the chairman of Occidental Petroleum;
Jorge Pereira, a banker; the Washington lawyer Eugene J. Metzger;
Thomas Wyman, a New York investor; and North Carolina National
Bank. Smaller investors included Joseph Farland, a former U.S. ambas¬
sador to Pakistan and Iran; John Safer, a real estate developer from
Alexandria, Virginia; the New York lawyer Jeremiah Milbank of Mil-
bank, Tweed, Hadley & McCloy; Peter M. Flanigan, a former Nixon
White House aide and a managing director of Dillon, Read, a New
York investment banking firm; the Washington lawyer R. Robert Li-
nowes; and William H. G. Fitzgerald, the chairman of North American
Housing Corporation.

Middendorf became chairman and president of the company in June
1977 and almost immediately began to encounter opposition from
other investors. The dissidents included Jackson Stephens, who, it was
later alleged, wanted FGB to use a company he controlled, Systematics
Inc., for its data processing business. (Stephens has denied that this
was his intention.) Several shareholders argued that Middendorf
should be replaced as CEO by a professional banker. One disgruntled
investor, Eugene Metzger, suggested a scheme to wrest control of FGB
from Middendorf, take the company private, and sell it to a foreign
bank at a big profit. He outlined this plan in mid-October 1977 in a
letter to an officer of North Carolina National Bank, a member of the
Middendorf group, suggesting that Stephens could carry out the
scheme with the help of a foreign bank or a Japanese client.

That same month, Metzger allegedly recruited Lance and Stephens,

Coming to America ( 41

and the three men began collecting stock in FGB. If the scheme suc¬
ceeded, it was later alleged, Lance would be given a senior position in
FGB. On November 9, Lance, Stephens, and a Stephens Inc. employee
named Curt Bradbury met with BCCI’s Abdus Sami in Little Rock to
discuss the National Bank of Georgia deal. Stephens and Bradbury
allegedly recommended that BCCI purchase FGB stock or recommend
the stock to its clients, but the BCCI officer said that he had no interest
in FGB.

A few weeks later, the picture changed dramatically. On November
25, the Fed ordered Olmsted’s International Bank and its affiliates to
cut their ties with FGB by selling all of their FGB stock by the end of
the year. A huge volume of stock would now be on the market. The
next day, Lance and Stephens met with Abedi at the Omni Hotel in
Atlanta and found a receptive audience. Abedi, after all, was already
familiar with FGB, having attempted to buy its Bank of Commerce
subsidiary in New York. He was aware of the company’s unusual
franchise — the right to own banks in different states. For someone as
politically attuned as Abedi, the fact that it was headquartered in
Washington, D.C., was plainly a major attraction.

When Abedi expressed some interest, Stephens offered to sell a
block of shares equivalent to 4.9 percent of FGB. He also recom¬
mended that Abedi pursue the matter with Eugene Metzger. At the end
of November, Abedi met with Metzger at a Washington hotel and
authorized him to buy 115,000 shares of FGB that were being offered
by one of Olmsted’s companies. The next day, Abedi asked about other
large blocks of FGB stock. He said that he had a client interested in
acquiring FGB, adding that he did not want BCCI’s involvement in the
transaction to be revealed.

Over the next several weeks, Lance, Stephens, and Metzger collected
millions of dollars’ worth of FGB stock on the open market and
through private purchases from large investors. * The shares would
later appear in the names of four Arab clients of BCCI’s:

• Kamal Adham, the former Saudi intelligence chief;

• Faisal Saud al-Fulaij, the former chairman of Kuwait Airways;

’'‘Stephens now seeks to play down his role in the whole affair, insisting in an interview
that he merely bought stock in FGB in response to buy orders from Metzger over a period
of a few weeks around the end of 1977. Metzger was acting as an agent for others, Stephens
says, but he insists he didn’t know the identity of Metzger’s clients. He does, however,
remember meeting with Sami and Abedi and recalls their interest in U.S. banks and some
discussion of the acquisition of NBG.

FALSE PROFITS

4 2 )

• Sheikh Sultan bin Zayed al-Nahyan, a son of Abu Dhabi’s Sheikh
Zayed;

• Abdullah Darwaish, a financial adviser to Zayed, acting on behalf
of Zayed’s son Mohammed.

By about the end of January 1978, BCCI’s Arab clients held roughly
20 percent of FGB’s stock. On top of that, Lance and his associates
controlled about 8 percent. Since each of the four Arab investors held
slightly less than 5 percent of FGB’s outstanding stock, they kept their
investment secret. Under U.S. securities law, any investor who buys 5
percent of the stock of a publicly held company is required to disclose
the investment by filing a Schedule 13(d) with the SEC. This did not
necessarily mean that Abedi’s clients were acting within the law, how¬
ever. If the investors were acting as a group, they were still obliged to
file disclosure statements.

Lance and his associates now decided that it was time to confront
the company’s top management. Armand Hammer, the head of Occi¬
dental Petroleum as well as an FGB board member and major share¬
holder, arranged for Lance to have lunch with FGB’s top executives on
February 7. “Hammer apparently planned to play peacemaker, but the
seventy-seven-year-old industrialist’s private jet was grounded by bad
weather and the meeting had to go on without him,” the Washington
Post later reported. Hammer, interestingly, had at least one connection
to the BCCI network: Pharaon was a big shareholder in Occidental.
Lance arrived at the Washington office of Occidental International
Corporation, the site Hammer had picked for the meeting, and was
joined by Middendorf, FGB’s president, and B. Francis Saul II, who
had replaced Middendorf as chairman in January after buying a large
block of FGB stock. He was a prominent Washington real estate
developer and financier.

What Lance said at the meeting has been hotly disputed. Mid¬
dendorf and Saul later said in sworn statements that Lance told them
he represented Abedi and BCCI and that BCCI “always wanted con¬
trol.” Lance also appeared to make a pitch for the chairmanship
or presidency of FGB. He said that after the company was taken
over, “he would play a significant role in running FG,” in Saul’s
words. Lance also recommended that Saul and Middendorf meet with
Abedi.

The next day, FGB issued a press release stating that it “has reason
to believe that possibly in excess of 15% of its outstanding common
stock has been purchased recently in a series of transactions.” The

Corning to America ( 43

statement added that FGB “has been informed that the purchases have
been made by a foreign bank which may be seeking to obtain control
of the Company.” The Washington Post carried a story the following
day headlined “Mideast Bank Buys Block of Financial General Stock,”
but the paper was unable to find out the name of the bank. Lance then
telephoned Saul to say that there had been a misunderstanding. The
buyers, Lance said, were not members of a group under the direction
of BCCI but were acting as individuals.

BCCI and Lance were linked to the deal publicly a few days later,
causing a flurry of press coverage. When reporters called BCCI for
comment, bank spokesmen issued blanket denials, which were later
found to be false. On February 13, for example, the New York Times
reported that BCCI officials “flatly denied making any purchases of or
having any involvement in efforts to acquire Financial General stock.”
Further, a BCCI official, Dildar Rizvi, “said that he had spoken today
with Mr. Abedi, who also denied any connection with efforts to pur¬
chase Financial General stock.”

In an effort to thwart what they viewed as a hostile takeover at¬
tempt, FGB lawyers met with officials of the SEC and the Federal
Reserve. FGB also retained a New York law firm widely regarded as
one of the leaders in mergers and acquisitions work, Skadden, Arps,
Slate, Meagher & Flom.

On February 17, FGB sued Abedi, Lance, Stephens, Metzger, the
Middle Eastern investors, BCCI, and two companies controlled by
Stephens: Stephens Inc. and Systematics Inc. The complaint alleged
that the “Lance group” began acquiring FGB stock in October 1977 in
what amounted to an illegal tender offer. According to the complaint,
the investors had been acting as a group, which meant that they had
violated securities laws when they failed to file 13(d) disclosure state¬
ments. One month later, the SEC also sued the “Lance group,” alleging
violations of securities laws. The defendants were BCCI, Abedi, Lance,
Stephens, Metzger, and the four investors in whose names the stock
had been acquired: Kamal Adham, Sheikh Sultan, Abdullah Darwaish,
and Faisal Saud al-Fulaij.*

To handle their defense, Lance, Abedi, and the Arab investors
turned to the man who had assisted Lance with the Lancegate scandal
the previous year, Clark Clifford.

*The SEC also named Middendorf as a defendant, alleging that he had violated certain
disclosure rules.

FALSE PROFITS

44 )

Clark McAdams Clifford has been a Washington fixture since the
1940s, an adviser to every Democratic president since 1945, when he
became a junior naval assistant in Truman’s White House. Truman
soon named him special counsel, a post he held until 1950, when he
left the White House staff to form a law firm in Washington. At the
time, the Truman administration was mired in scandals involving
friends of the president who were accused of cashing in on their White
House connections. They were nicknamed “5 percenters” because of
the kickbacks they allegedly took for securing government contracts.

Elegant and patrician, Clark Clifford has always striven to differen¬
tiate himself from the common Washington influence peddler. “There
is one point I wish to make clear,” he once said. “This firm has no
influence of any kind in Washington. If you want to employ someone
who has influence, you will have to go somewhere else. . . . What we
do have is a record of working with the various departments and
agencies of the government, and we have their respect and confidence,
and that we consider to be a valuable asset.” Nevertheless, there is no
denying that connections were a cornerstone of Clifford’s career, as he
himself acknowledged privately.

In April 1951, David Lilienthal, Clifford’s friend and a senior Tru¬
man administration official, wrote in his diary about a lunch with
Clifford. Lilienthal noted that his friend’s law practice was flou¬
rishing — Clifford “earned probably as much as any professional man
in the country” — but that he feared his practice would suffer if
Truman were not reelected in 1952. “He was uneasy about what will
happen after Truman is out, if he is; wonders if he will keep any of his
clients. . . (Lilienthal added that this was “nonsense” because of
Clifford’s abilities.)

Clifford not only survived the Democrats’ loss of the White House
but prospered, forging new relationships over the next three decades.
In the 1950s, a rising young senator named John F. Kennedy retained
Clifford as his personal lawyer. After Kennedy became president, he
appointed Clifford chairman of the Foreign Intelligence Advisory
Board. Lyndon Johnson tapped him to serve as secretary of defense
during the last year of his administration. Jimmy Carter used him as a
presidential envoy to Greece, Turkey, and India.

Clifford’s connections also enabled him to attract such corporate
clients as General Electric, W. R. Grace Shipping, Phillips Petroleum
(on whose board Clifford served), McDonnell Douglas, and Knight-
Ridder (where he was also a board member).

One politician who envied Clifford was George Smathers, a Demo-

Coming to America ( 45

cratic senator from Florida. In The Superlawyers, a 1972 book on
Washington law firms, Joseph C. Goulden wrote:

Smathers said publicly that he intended to leave the Senate after his
second term expired, in 1968. “I’m going to be a Clark Clifford,”
he said in 1966. “That’s the life for me.” And after only a few
months of private practice he told a Miami reporter: “I’ve found the
pastures outside are a lot greener than I had presumed. A fellow with
my background can make more money in thirty days out here than
he can in fifteen years as a senator.”

Also important to Clifford’s success were his persuasive style and
commanding presence. With his distinguished profile and mellifluous
voice, Clifford was everyone’s picture of the elder statesman. He bears
a striking resemblance to the late actor Ralph Bellamy, who portrayed
Franklin Roosevelt in Sunrise at Campobello .

When Lance retained Clifford in connection with the Lancegate
affair, he was assisted by his partner Robert Altman. Although Altman
was just thirty years old and had become a partner only the year be¬
fore, he had impressed Clifford with his energy and quick mind.

Lance’s impressive performance at the previous Senate hearings
owed much to Clifford’s and Altman’s assistance. The banker’s open¬
ing remarks, for example, had been drafted with his lawyers’ help. As
Lance spoke, Clifford — like a ventriloquist — silently mouthed the
words of the statement. Clifford seemed to awe some of the senators
with his magisterial style. At one point, for example, Lance was sub¬
jected to harsh questioning about a complicated series of transactions.
It was alleged that he had used the same collateral to obtain loans from
two different banks. Clifford took the floor and said calmly that Lance
had decided that “the simplest thing to do was to pay off the note, and
he paid it off.”

Clifford’s powerful presence was evident at another point in the
hearings. Years later, Phil Gailey of the St. Petersburg Tunes recalled
the scene:

Senators were whispering among themselves. Reporters and specta¬
tors were adding to the noise level. The lack of decorum annoyed
Clark Clifford, the stately Washington lawyer representing then-
President Jimmy Carter’s beleaguered budget director.

Clifford, with chiseled face and silver mane, did not ask the chair¬
man to restore order. He simply raised a finger into the air. The room
fell silent.

Such was the prestige and the presence of Clifford — super lawyer,

FALSE PROFITS

4 6 )

adviser to presidents, political wise man and ultimate Washington

insider.

In the FGB case, Clifford again asked Altman to serve as his right-
hand man. They, in turn, were assisted by experienced takeover spe¬
cialists from the New York firm of Wachtell, Lipton, Rosen & Katz,
the archrival of Skadden, Arps, which represented FGB. The two firms
so dominated takeover law that they were viewed as the Coke and
Pepsi of the field.

Clifford’s team quickly negotiated a settlement of the SEC’s law¬
suit — so quickly, in fact, that the defendants signed the consent
agreement on March 18, the day after the suit was filed. It was an
extremely favorable deal for Abedi and his associates. Without admit¬
ting or denying guilt, the Middle Eastern investors promised not to
violate securities laws in the future. They also agreed to establish a
special $i million fund to compensate former FGB stockholders who
had sold their stock in the open market at less than $15 a share. (If the
sellers had known that rich Arabs were scooping up the stock, it was
reasoned, they would have demanded higher prices.)

The most extraordinary aspect of the settlement was the provision
that the investors make a tender offer to all FGB stockholders at $15
per share (subject to approval from the Fed to form a bank holding
company). The SEC’s apparent reasoning was that this would give the
shareholders a chance to sell their stock at a high price. In effect, it
meant that Abedi and his associates were actually being rewarded for
having purchased the stock covertly.

The consent agreement was not the end of the story. It merely raised
the curtain on one of the longest and most controversial takeover
dramas in U.S. corporate history.

Many observers suspected that Abedi’s Arab clients were trying to buy
political influence in the United States. Bert Lance, said a New York
Times editorial, “enjoys easy access to the White House, which may
explain why wealthy Arabs have hired him to invest their oil fortunes
in the United States.” William Safire made much of Kamal Adham’s
status as Saudi Arabia’s former intelligence chief. Thanks to Lance, he
wrote, “the top Saudi spy will now be able to examine the intimate
financial vulnerabilities of some of our nation’s lawmakers and mili¬
tary leaders.”

FGB’s lawyers kept the pot boiling by pressing ahead with their suit

Coming to America ( 47

against Abedi and his associates. Two of the Arab investors — Fulaij
and Adham — retaliated in June by filing a countersuit against FGB’s
chairman and president, Saul and Middendorf, ten other board mem¬
bers, and FGB itself. The suit accused the directors of violating federal
securities laws and making false statements to shareholders in order to
maintain control of the company and to block the Middle Eastern
investors from buying additional FGB stock.

FGB’s lawyers, in turn, used the discovery process aggressively, de¬
manding documents from the defendants and taking depositions from
Abedi and his associates. They soon hit pay dirt. A particularly damag¬
ing disclosure concerned Lance’s financial dealings with BCCI. The
SEC had alleged in its complaint that Lance had “obtained substantial
personal loans that were arranged by BCCI.” BCCI’s Dildar Rizvi told
the Washington Post that Lance “was paid nothing by the bank”;
Allaudin Shaik, another BCCI official, said that Lance had “received
absolutely no loans from BCCI or loans arranged by BCCI.”

These statements were false. FGB’s lawyers discovered that BCCI
had arranged for Lance’s biggest debt — $3.6 million owed to First
National Bank of Chicago — to be repaid on January 4, 1978. Abedi
himself, in fact, later admitted that BCCI had lent Lance about $3.5
million. At a court hearing in March, Edward McAmis of Skadden,
Arps alleged that BCCI had paid off the loan without even asking
Lance to sign a note. Robert Altman reacted by accusing McAmis of
deliberately misconstruing the loan as part of a campaign to smear
Lance. Altman said formal loan documents were being drawn up but
had not been completed because of the lawsuit and other complica¬
tions. In fact, BCCI never gave a satisfactory explanation of the loan.
When the Wall Street Journal published a story on BCCI in February
1980, it tried to determine what had happened to Lance’s debt to
BCCI. The bank said that the loan was no longer on its books — but
declined to say how or by whom it had been repaid.

FGB’s lawyers also uncovered many indications that the Arabs had
acted not on their own behalf but possibly as front men for BCCI.
They found, for example, that Fulaij had paid for his FGB stock by
borrowing $3.55 million from the BCCI affiliate he headed, Kuwait
International Finance Company.

As part of the takeover fight, Abedi was extensively deposed by
Skadden, Arps’s lawyers at Browns Hotel in London on March 8,
1978. Although he tried to distance himself from the transaction,
Abedi gave several hints that he had played a key role in the run at

FALSE PROFITS

48 )

FGB. Abedi said that after a meeting with Eugene Metzger and BCCEs
Abdus Sami, he “approved that they should start buying some shares.”
He later amended his story, saying, “I didn’t approve. I had the instruc¬
tions from an individual client who was interested in making an invest¬
ment and who made his own decision.” All he really meant, he ex¬
plained, was that he was present when Metzger was asked to start
making purchases.

Skadden, Arps also amassed a great deal of negative information on
BCCI from the files of Bank of America. Douglas M. Kraus, a lawyer at
Skadden, Arps, demanded that B of A turn over documents relating to
BCCI. At a meeting with a B of A officer in London, he was shown
several documents and asked that they be copied. The banker took the
documents out of the room and said he would return shortly. But when
he came back, he said that the bank’s lawyers had advised him not to
provide copies.

Kraus eventually obtained the documents, which revealed that B of
A had serious concerns about the way BCCI did business. One docu¬
ment said that B of A thought BCCI’s loan-loss reserves should be
increased from $3 million to $17 million. Another damaging disclo¬
sure was that BCCI had loaned more than $80 million to “insiders” —
companies and individuals connected to the bank.

Even more controversial than BCCI’s business practices were the back¬
grounds of some of the Arab investors, who were alleged to be in¬
volved in corruption, repression, and terrorism.

Kamal Adham was not only the former Saudi intelligence chief and
an adviser to the royal family, he had parlayed his connections into a
lucrative career as a middleman for foreign companies doing business
in the kingdom. Much of his work consisted of collecting “commis¬
sions” from arms manufacturers and other foreign companies. His net
worth was about a quarter of a billion dollars, according to his law¬
yers.

One of Adham’s clients was the Boeing Company. In a 1975 deal, he
helped it sell $137 million worth of aircraft to Egypt — a country in
which he had considerable influence, thanks in large part to his role in
channeling Saudi money to the Sadat regime. Details emerged after the
SEC and the Federal Trade Commission filed suit against Boeing.
When the cases were settled in 1978, Boeing admitted paying $8.7
million to corporations in Liechtenstein; company spokesmen said
they believed that the ultimate recipients were individuals who had

Coming to America ( 49

arranged or provided financing for the sale. Although the names of
those people were withheld by the government, the Wall Street Journal
filled in the blanks by interviewing government sources. In June 1978,
the Journal reported that Boeing had been assisted by Adham and
Mahdi al-Tajir, a diplomat from the UAE, and Sheikh Zayed.*

Adham and Zayed were not the only figures in the FGB deal who
were linked to questionable payments by Boeing. So was Faisal Saud
al-Fulaij, another big buyer of FGB stock. From 1964 to 1977, he
served as the chairman of Kuwait Airways, the state airline. The
Federal Trade Commission identified him as the recipient of at least
$300,000 in bribes from Boeing. The commission’s draft complaint
said, “The payment, at the direction of a Boeing Co. officer, was made
through a fictitious Swiss consulting firm.” Fulaij denied the allega¬
tion.

Some of the BCCI clients were also linked to human rights abuses.
Adham was the head of Saudi intelligence at a time when the re¬
gime was ruthlessly suppressing opposition. Political opponents were
rounded up and jailed; some of them, according to human rights
groups, were tortured and executed. Some of the military officers who
were arrested in the wake of a 1969 coup plot were tortured by the
secret police; a few of them died in prison. In its human rights report
for 1977 — when Adham was still the head of Saudi intelligence —
Amnesty International said that it knew of two hundred political
prisoners by name. Sheikh Zayed’s human rights record was better, but
his country was still an absolute dictatorship. A State Department
human rights report states succinctly: “The UAE has no formal demo¬
cratic institutions, and citizens do not have the right to change their
government.” The report notes that “political parties are prohibited.”

Terrorism was another controversial issue. Both Saudi Arabia and
the United Arab Emirates have provided important political and fi¬
nancial backing to the Palestine Liberation Organization, which the
U.S. government classifies as a terrorist group.

Finally, there was the Arab oil embargo of the United States for its

*A 1 -Tajir had encouraged Zayed to lend Egypt up to $90 million to finance the aircraft
purchases, U.S. officials said, while Adham had used his influence with the Egyptian
government to ensure that Boeing would be the supplier. Asked to comment on the deal in
1991, a lawyer for Adham, Plato Cacheris, confirmed to a Wall Street Journal reporter that
Adham had urged the Egyptians to use Boeing. He added that Adham was proud of the
deal, because the Egyptians would otherwise have bought Soviet airliners.

FALSE PROFITS

50 )

support of Israel in the 1973 Yom Kippur War. Memories of long lines
at the gasoline pumps were still fresh.

Despite all the controversy, the BCCI clients pressed ahead with their
campaign, and the takeover battle dragged on into 1979. In January,
FGB won an important victory when Maryland’s attorney general
issued a legal opinion that FGB’s Maryland bank could not be ac¬
quired in a hostile takeover. On the basis of that opinion, the Federal
Reserve ruled that the Arab investors could not take over FGB. The
investors responded by asking a federal court to declare the Maryland
law unconstitutional.

The investors then tried to mount a proxy fight. They chose three
individuals who would seek election to FGB’s board: Stuart Sym¬
ington, a former Democratic senator from Missouri; Elwood R.
Quesada, a real estate developer in Washington; and Donald D. Not-
man, the former chairman of National Bank of Washington. All three
were close associates of Clifford’s. Clifford served on the board of
Notman’s bank, and Symington and Clifford had been intimates since
the 1940s. When Symington ran for president in i960, Clifford was
his campaign manager.

When Clifford first contacted Symington about FGB in August
1978, the retired senator was in Canada, fishing for salmon with the
comedian Bob Hope. Symington later said that Clifford asked him to
serve as “a trustee of some Arabian investors who were anxious to
obtain control of Financial General.” Telephone voices on Bob Hope’s
boat reverberated all over the craft, so Symington kept the conversa¬
tion short, saying he would discuss it back in Washington. Upon his
return, Symington talked it over with Clifford, who introduced him to
Kamal Adham. Symington said he was impressed by the Arab sheikh.
He also said he checked the proposal out with leading people in the
banking business, who all told him they thought it was “a very good
idea possibly to get petrodollars back into the United States.” Sym¬
ington agreed to become chairman of a Netherlands Antilles company
called Credit and Commerce American Holdings N.V. (CCAH), a
dummy company set up by the investors to carry out the acquisition.

Financial General’s annual meeting was held on April 30, 1980, in an
atmosphere of great anticipation. More than two and a half years had
elapsed since Lance and his associates had started collecting FGB
stock, and the battle might soon be over. The Arab investors had been

Coining to America ( 51

soliciting proxies from other FGB shareholders. If they collected
enough, they could take control of the board of directors. When the
votes were counted, FGB’s management claimed victory, but the tally
was very close. Altman said that settlement talks would continue in an
effort to end the fight.

FGB’s board of directors finally capitulated, and the two sides
signed a letter of understanding on May 21. After some additional
haggling over price, a formal acquisition agreement was signed on July
25. Three representatives of the Arab investors — Clifford, Syming¬
ton, and Quesada — were then elected to the board.

In spite of the agreement, the deal still had to be approved by the
Federal Reserve Board, which has jurisdiction over bank holding com¬
panies. If the Fed gave its nod, FGB would be taken over by dummy
companies set up for that purpose, the main one being CCAH.*

CCAH’s shareholders included three of the original four BCCI cli¬
ents who had bought stock in late 1977 and early 1978: Kamal Ad-
ham, Faisal Saud al-Fulaij, and Abdullah Darwaish.f There were also
eleven other Middle Eastern investors:

• The Abu Dhabi Investment Authority, an investment vehicle con¬
trolled by Sheikh Zayed;

• Stock Flolding Company, owned by the family of Sheikh Rashid
bin Said al-Maktoum, the ruler of Dubai;

• Abdul-Raouf Khalil, a Saudi Arabian businessman close to Ad-
ham;

• Crescent Holding Company, owned by Sheikh Mohammed bin
Rashid al-Maktoum, a son of Dubai’s Sheikh Rashid;

• Mashriq Holding Company, a vehicle of Sheikh Hamad bin Mo¬
hammed al-Sharqi, the ruler of Fujeirah (part of the UAE);

• Sheikh Humaid bin Rashid al-Naomi, the crown prince and dep¬
uty ruler of Ajman, UAE;

• Ali Mohammed Shorafa, a top adviser to Sheikh Zayed;

• Mohammed Hussain Qabazard, an aide to Zayed;

• Gulf Investment Real Estate Company;

• Real Estate Investment Company; and

*CCAH was the parent of Credit and Commerce American Investments B.V. (CCAI), a
Dutch company. CCAI, in turn, would own all the stock of a U.S. dummy company, which,
in turn, would own FGB. The layering of companies in these jurisdictions is a common
technique used to avoid taxes, known as a “Dutch sandwich.”

tShiekh Sultan, another son of Sheikh Zayed’s and one of the four original investors,
sold all of his FGB stock to Adham in the fall of 1978.

FALSE PROFITS

5 2 )

• Sayed Jawhary (sometimes spelled El-Gohary), a friend and busi¬
ness manager of Adham’s.

The proposed takeover presented unusual problems to the regula¬
tors. When a large bank holding company is acquired, the buyer is
usually an existing bank. In this case, FGB was to be bought by dummy
companies owned by individual investors, none of whom was a
banker. A further complication was that all the investors were resi¬
dents of foreign countries. Could U.S. regulators effectively monitor
the new owners?

Perhaps even more important, bank regulators had serious concerns
about BCCI, and they did not want it to be involved in the ownership
or management of FGB. Questions were raised by the Federal Reserve
Board, the Federal Reserve Bank of Richmond, the Virginia commis¬
sioner of financial institutions, and the Office of the Comptroller of the
Currency (OCC), the main regulator of nationally chartered banks.
The investors would have to convince the Fed that FGB would be run
by Americans who had solid banking credentials — and that BCCI
wouldn’t be involved.

To allay the regulators’ fears, lawyers for the Arab investors devised
a formula to insulate the company from the foreign investors. If the
takeover went through, FGB would be controlled by a board of direc¬
tors consisting of distinguished U.S. citizens, including former Senator
Symington. To ensure the board’s autonomy, Symington would have
the right to vote the majority of the Arabs’ stock for five years. In the
words of one observer, “The lawyers proposed that there be a buffer in
the form of a blue-ribbon board of directors, and the shareholders
would basically agree to take a walk.”

As far as BCCI was concerned, the application stated that “BCCI
owns no shares of [FGB], CCAH or CCAI, either directly or indirectly,
nor will it if the application is approved. Neither is [it] a lender, nor
will it be, with respect to the acquisition by any of the investors of
either [FGB], CCAI or CCAH shares.” The investors would finance
the takeover with their personal funds and by borrowing from fi¬
nancial institutions not affiliated with BCCI. Some of the money
would be lent by a bank in Paris, Banque Arabe et Internationale
d’lnvestissement. BCCI would have no involvement in the manage¬
ment of FGB, although it could act as an investment adviser to the
Middle Eastern owners.

Some regulators continued to have doubts, including Virginia’s state

Coming to America ( 53

bank regulator and the OCC. In March 1981, the OCC sent a letter to
the Fed expressing concerns about enhanced ties between FGB and
BCCI because no individual regulatory body had a worldwide view of
BCCI’s operations. BCCI, the letter stated, “is not subject to regulation
and supervision on a consolidated basis by a single bank supervisory
authority.”

The Fed also received letters from a wide range of people opposed to
the takeover, including board members of FGB’s banks, stockholders,
customers, and ordinary citizens. Some raised valid issues, but there
also seemed to be elements of xenophobia. One FGB stockholder
wrote that “any group of Middle Eastern investors associated with
Burt [sic] Lance” would be

grossly unsound in terms of potential management. How aliens
could effectively meet the high banking standards prevailing in the
United States, when they come from economies which operate out¬
side the market system and which have no commercial banking
industry of the type that flourishes here in our free enterprise society
is a complete mystery to me.

An elderly couple in Winchester, Virginia, said that they were con¬
tented customers of the Shenandoah Valley National Bank (an FGB
subsidiary) and were happy with it the way it was, adding, “In the
event it loses control to Bert Lance & the Arabs, we will sever all
connections with it.” A woman on the board of another FGB bank
expressed concern about the second-class status of women in Arab
countries:

Without casting aspersions on any party because of ethnic origin, I
must point out as regards to women the basic cultural difference in
the Arab world, from which the would-be acquirers come, and
modern American society.

These businessmen are products of a culture which looks on
women solely as chattel and procreators and does not even allow
women to eat with men nor walk by their side.

Because of the doubts and criticism, the Fed decided to hold a
private hearing on the application. Only then would it decide whether
BCCFs clients could take over FGB.

At 9:39 a.m. on April 23, 1981, more than two dozen people gathered
in Room B-1215 of the Federal Reserve’s Main Board Building, a
grand, white marble edifice at 20th Street and Constitution Avenue in

FALSE PROFITS

54 )

Washington, D.C. It is now called the Eccles Building, after the Fed’s
former chairman Marriner S. Eccles. There were federal and state bank
regulators, four of the Arab investors, one FGB official, and a host of
lawyers, including Clark Clifford and Robert Altman. The meeting
was chaired by Robert E. Mannion, a deputy general counsel of the
Fed. Two of the Arab investors had been featured in the press for more
than three years, Kamal Adham of Saudi Arabia and Faisal Saud
al-Fulaij of Kuwait. The other two investors were much more obscure:
Abdul-Raouf Khalil and Sayed Jawhary. Both were close associates of
Adham’s.

After Mannion and Clifford introduced the participants, Sidney
Bailey, Virginia’s commissioner of financial institutions, took the floor.
A feisty chain smoker who has devoted his life to banking regulation,
Bailey had an important interest in the matter, since FGB did more
business in Virginia than in any other state, and he was strongly
opposed to the takeover. He was skeptical that it was simply a routine
investment. What was the motive, he asked, “giving rise to this pro¬
tracted, expensive campaign to buy Financial General?” There was
little doubt, he said, “that some incentive other than orthodox invest¬
ment motives must have prompted this effort.” In Bailey’s view, there
was a strong possibility that the takeover bid was prompted by politi¬
cal motives.

It was now Clark Clifford’s turn to speak, and he was clearly in his
element. For years he had used his considerable charm and skills of
persuasion in settings just like this. The eminent lawyer spoke elo¬
quently of the need for the United States to attract investment from the
Middle East. There was, he said, “a growing feeling among many
thoughtful and experienced Americans that it is in the interest of our
country ... to bring back to the United States as many of the dollars as
we can that through the years we send over to the OPEC countries.”
He also spoke of his high regard for the Arab investors. Describing
Adham as “a prominent businessman in Saudi Arabia,” Clifford lav¬
ished praise on him: “I have come to have the deepest respect for his
character, for his reputation, for his honor, and for his integrity. I’m
proud to be an associate of his.”

Clifford recounted what he described as a recent conversation with
B. F. Saul, FGB’s chairman. “He had occasion to go to London, maybe
more than once,” Clifford said. “He had occasion to go to the Middle
East, the Persian Gulf countries. I remember later on his talking with
me, and he said, ‘I have looked into the reputation, particularly of the

Coming to America ( 5 5

leader of the group, of His Excellency Sheikh Kamal Adham.’ And he
said, ‘It’s difficult to recall a time when I have heard such universal
commendation for an international businessman. I hear it in London.
I’ve heard the most commendatory comments. I’ve heard about him
in countries of the Persian Gulf. I have not heard one whisper of
criticism against this man.’ And he said, ‘I feel perfectly comfortable
about this group, headed by this man, coming in and taking over our
banks.’ ”*

In his statement and in response to questions from the regulators,
Clifford described how Adham and his associates happened to buy
their FGB stock; it contrasted sharply with the version in the SEC
complaint. Adham, according to Clifford, got the idea not from BCCI
but from a friend named Hassan Yassin, who worked at the Saudi
Arabian Embassy in Washington. Adham then asked BCCI to evaluate
the stock for him. In other words, it was pure coincidence that Abedi
was being told about the same stock at the same time by Bert Lance
and Jackson Stephens.

Clifford also did his best to play down Lance’s role — a wise move,
since the regulators regarded Lance as a kind of Typhoid Mary of the
banking industry. Clifford provided an extraordinarily terse account
of Lance’s involvement in the deal: “At one time he did own a few
shares of stock. He sold the stock. Retired from participation in it.”
(This statement is reminiscent of Clifford’s remark in 1977 at the
Senate hearing on Lance when he said his client had merely borrowed
money and then paid it back.)

Clifford said that if the takeover was approved, the Arabs would be
passive investors and the company would be run by “a top, very well
regarded commercial banker,” someone with twenty-five or thirty
years’ experience.

Each of the four Arab investors then took the floor to introduce
himself and recount how he became involved with FGB. Adham talked
about his business activities but did not discuss his long service as
Saudi Arabia’s intelligence chief. He echoed Clifford’s statement that
he had learned about the company from a Saudi friend. “Mr. Yassin

*Saul disputed Clifford’s account several years later: “I never did go to the Middle East
to meet him. I think I met Kamal Adham in Washington once. I don’t think I ever met him
in London. I met him for twenty minutes. I did not try to make a judgment whether they
should own a bank. That was something for the Federal Reserve to do. All I was concerned
about was whether this was in the best interest of the shareholders, and I thought it was.
I didn’t know these people.”

FALSE PROFITS

56 )

advised me that the stock had become available for purchase in Finan¬
cial General and that this company might provide an attractive invest¬
ment opportunity,” he said. “I asked BCCI to evaluate this property
for me and advise me as to its suitability as an investment.”

After a midday break, the meeting reconvened at 1:38, and the
regulators questioned the investors and their lawyers about various
aspects of their testimony, including how they happened to invest in
the company and their relations to BCCI.

Adham stated firmly that he was not a front man for BCCI. “I think
that from the line of questions, it appears that there is doubt that there
is somebody or BCCI is behind all of this deal,” he said. “I would like
to assure you that each one on his own rights will not accept in any
way to be a cover for somebody else.” He added, “We don’t need
anybody to use us, to be a cover for them. We are doing it for our¬
selves.”

The Fed’s Mannion noted that the two dummy companies estab¬
lished to carry out the acquisition had names that were similar to that
of BCCI: Credit and Commerce American Holdings and Credit and
Commerce American Investments. Clifford brushed this aside as
meaningless, saying, “I think generally the term ‘credit’ and the term
‘commerce’ are terms that are used extensively in the Persian Gulf in
financial affairs. ... I know of no additional reasoning behind it.”
(Clifford was mistaken. The only major bank in the region with those
words in its name was BCCI.) Altman said that “there is no connec¬
tion between those entities and BCCI in terms of ownership or other
relationship.” At one point in the proceedings Clifford said, “There
is no function of any kind on the part of BCCI. I know of no
present relationship. I know of no planned future relationship that
exists.”

The atmosphere of the meeting was cordial, and most of the regula¬
tors were deferential to Clifford and his clients. Throughout, Clifford
referred to Adham as “His Excellency,” a term that isn’t always ap¬
plied to Saudi sheikhs. In Saudi Arabia, “sheikh” is not a title of
nobility but simply an honorific for a respected person — roughly
equivalent to calling a distinguished Spaniard “don.” Taking their cue
from Clifford, however, the regulators began to refer to Adham as
“His Excellency.”

No one challenged Clifford’s portrayal of Adham as simply a busi¬
nessman, even though he had been identified repeatedly in the press as
his country’s intelligence chief. He had held that post until 1977 but

Coming to America ( 57

continued serving as a royal adviser. There was no discussion of the
Boeing bribery case — which involved Adham and Fulaij — even
though the Fed’s correspondence with the SEC makes it clear that the
bank regulators knew about it.*

One regulator who asked tough questions was Virginia’s Sidney
Bailey, but he was an exception. Asked about the experience years
later, Bailey said, “I felt like a voice in the wilderness. The Fed paid
little attention to what I had to say.” He said he felt like a “mouse in a
room full of dancing elephants.”

Throughout the approval process, the Fed ignored numerous clues
that the investors may have been fronting for BCCI. On May 17,1978,
the London Financial Times published an article on BCCI based on an
interview with Abedi, stating in part: “He is not yet sure who will
make the offer [for FGB], but whoever makes it and if it succeeds,
BCCI will probably manage Financial General.”

Moreover, Clifford and Altman’s assertion that the Arabs’ pur¬
chase of FGB stock was a routine investment not connected with BCCI
had been sharply contradicted three years earlier. In FGB’s lawsuit
against Lance and the Arab investors, among others, U.S. District
Judge Oliver Gasch held that the Arab investors had acted as a group
to take over FGB in violation of securities law. Gasch wrote in his
opinion that Abedi had essentially put together the deal, assembled the
investment group, and instructed Lance and others to buy stock for
them. Further disputing Clifford’s statement, Gasch held that it was
Abedi — not Hassan Yassin — who had recommended the stock to
Adham.

Another important sign of BCCI’s involvement was that several
members of the investment group had close ties to BCCI. Adham,
Fulaij, and Sheikh Zayed were BCCI shareholders, and Fulaij was
chairman of BCCI’s Kuwaiti affiliate, Kuwait International Finance
Company (KIFCO). Perhaps most important, Fulaij, as noted earlier,
had financed his initial investment in FGB by borrowing $3.55 million
from KIFCO. Adham had also borrowed from the bank, and other
members of the group may have done so as well. When FGB’s manage¬
ment was fighting the takeover, one of its lawyers said in an affidavit

*On July 5, 1980, the Fed asked the SEC for information about the Boeing case.
Theodore Levine, an SEC lawyer, confirmed in a letter that the names of two of the
investors had come up in the Boeing investigation.

FALSE PROFITS

58 )

that he had seen a Bank of America document revealing that BCCI had
made loans to two of the initial four Middle Eastern investors.

The Federal Reserve brushed aside all these connections. One Fed
document suggests profound ignorance — or willful blindness. A letter
from a Fed official to Congressman Benjamin Rosenthal, a New York
Democrat who raised questions about the takeover, contains this state¬
ment: “Staff has no knowledge of loans from or other involvement in
the affairs of BCCI on the part of Applicants’ principals [the Arab
investors].” Another extraordinary statement appears in an internal
Fed memorandum dated August 7, 1981. It says, in part: “There is no
evidence in the record that BCCI ever owned or controlled shares of
FG, or that the investors acted through BCCI to control FG.” Not only
was there no doubt that the investors had acted through BCCI to buy
the stock, the Fed had it backward: the real issue was whether BCCI
had acted through the investors to gain control of FGB.

On August 25, 1981, four months after the hearing, the Federal
Reserve Board announced that it had approved the takeover of Finan¬
cial General Bankshares.

There was a final regulatory hurdle before the takeover could proceed.
The New York State Banking Board had to approve the deal because
FGB controlled two small banks chartered by the state. This was not a
major barrier, since the banks could always switch to a national char¬
ter, but the Arab investors nonetheless sought approval.

There was considerable opposition to the deal in New York, partly
because some members of the state’s large Jewish community were
suspicious of the Arab investors. One opponent was Manfred Oh-
renstein, the minority (Democratic) leader of the New York state
senate. In March 1981, he sent a letter to Muriel Siebert, the state
banking superintendent, in which he suggested that the Arab investors
were trying to increase their political influence. “Financial General
Bankshares,” he wrote, “could be one of the most valuable bank
holding companies in the United States to a foreign investor who
desired maximum influence on American banking and political institu¬
tions” because the company controlled banks “in the Washington,
D.C., metropolitan area.”

One month later, Ohrenstein wrote to the Fed’s chairman, Paul
Volcker, raising the issue of terrorism. He asked whether any of the
investors “or the organizations for which they act as representatives
[are] affiliated in any way with any international terrorist organiza-

Coming to America ( 59

tions” or whether they provide “any financial assistance” to any ter¬
rorist organization. In a written response, Robert Altman gave a sim¬
ple reply to both questions: “No.”*

Clifford had gone to the state capital of Albany on May 12,1981, to
meet with Ohrenstein. The legislator said that Clifford tried to reas¬
sure him by describing the takeover as “a passive investment on the
part of these people.” Ohrenstein was unmoved. Two weeks later, he
wrote to Clifford and accused him of providing inaccurate informa¬
tion about the Arab governments’ policies toward foreign investment.
Contrary to Clifford’s assertions, Americans did not have the same
rights and privileges in terms of investments as the Middle Eastern
investors who were bidding for FGB. Ohrenstein listed restrictions on
foreign investment in Kuwait, the UAE, and Saudi Arabia. He added
that “the rulers of the governments imposing those restrictions are the
same persons who are investing in Financial General Bankshares, high-
ranking officials from the United Arab Emirates — Abu Dhabi, Dubai,
Fujaira [sic] and Ajman — and Kuwait and Saudi Arabia.”

On September 21, the New York State Banking Board conducted its
own hearing on the takeover at the World Trade Center in Manhattan.
Unlike the Fed meeting the previous April, this one was open to the
public, and anyone was allowed to express an opinion. The atmo¬
sphere was much less polite as a series of speakers asked the kind of
tough questions that had been skirted at the Fed meeting. A number of
people said they feared that FGB would become a tool of Arab foreign
policy. One suggested that Clifford may have violated federal law by
failing to register with the Justice Department as a foreign agent.
Another went so far as to describe him as a “front man” for the Arab
investors. Clifford dismissed much of the criticism as the product of
prejudice against the Arabs. “That’s what it came down to as I listened
to it,” he said.

In November, the New York State Banking Board voted against the
takeover. The following March, another vote was taken; this time the
takeover was approved by a vote of 9-2 (one more vote than was
needed). One reason for the reversal was that the Arab investors
agreed that FGB would divest its New York City subsidiary, Bank of
Commerce. The bank it owned in upstate New York would be allowed
to expand into New York City.

*In 1989, Altman was asked to reconcile his answer with Saudi and UAE support for
the PLO. He expressed offense at the question but refused to answer it.

FALSE PROFITS

60 )

Immediately after New York State gave the green light, the investors
made a tender offer for all FGB shares. On April 19, 1982, the invest¬
ors announced that the tender offer had been successful: they had
acquired 96 percent of the company’s outstanding common stock,
paying just over $200 million for the shares. (During the next several
years, the investment group was reshuffled from time to time, with
some additional BCCI clients coming in. One man who invested in the
mid-1980s was Khalid Bin Mahfouz, whose family controls National
Commercial Bank, the largest bank in Saudi Arabia, and acts as
banker to the ruling family.)

The takeover was followed by a shake-up of FGB’s top manage¬
ment. Clifford had promised the Fed that the investors would recruit a
seasoned banker to serve as president and CEO, and he fulfilled this
part of the agreement by recruiting Robert G. Stevens, the former
chairman and CEO of BancOhio Corporation, a large bank holding
company in Columbus. (Stevens held that post until June 1989, when
he was replaced by the longtime FGB executive Jack Beddow.)

To a great extent, Stevens was the CEO in name only, with Clifford
and Altman dominating the company. The board included Clifford
and four other directors close to him: Altman, Symington (as vice
chairman), the retired army general James M. Gavin, and Elwood R.
Quesada. The distinguished American elected chairman of the board
was none other than Clark McAdams Clifford. What is more, Altman
became president of a holding company that ranked above FGB on the
organization chart/* Thus, of the four top positions, only one was held
by a banker. The board also designated Clifford’s law firm as the
company’s general counsel, a move that later raised conflict-of-interest
questions. Even more questionably, the firm continued to do legal
work for BCCI.

In August 1982, a new name for the company was unveiled: First
American Bankshares, Inc. The change had been in the works before
the takeover, but it was nevertheless an extraordinary move in view of
the company’s new foreign ownership. A more appropriate name
would have been First Arabian Bankshares.

Just as First American’s new management was settling in, the Federal
Reserve learned that Abdullah Darwaish, one of the leading share-

*FGB Holding Company, the direct parent of FGB. In August 1982, it was renamed
First American Corporation.

Coming to America ( 61

holders and Sheikh Zayed’s financial adviser, had been accused of
defrauding the sheikh out of nearly $100 million. Still more disturbing
was that the accusation was made months before the takeover went
through, yet, apparently, no one had bothered to tell the regulators
about it.

Sometime around the end of 1981 or beginning of 1982, Darwaish
was placed under house arrest and dismissed from his posts as chair¬
man of Zayed’s Department of Personal Affairs and chairman of the
Abu Dhabi Investment Company. His chief deputy, Riaz Saleem As-
lam, was jailed in late 1981. In March 1982 — the month before the
takeover was consummated — Sheikh Zayed brought two lawsuits in
U.S. courts against Darwaish, Aslam, and other defendants, charging
that they had been involved in an elaborate scheme to defraud him of
$96 million through investments in copper, gold, and U.S. government
bonds. * Somehow the U.S. regulators managed to remain ignorant of
the case, and Darwaish’s name continued to appear prominently in
documents related to the takeover. The formal tender offer document
for FGB, filed with the SEC on March 3, 1982, listed Darwaish as one
of the three controlling shareholders in the takeover group (along with
Adham and Fulaij) and identified him with the titles he held before his
arrest.

Fed officials said that they learned of the Darwaish case when the
Washington Post published a story on the U.S. litigation on August 10,
1982. “Documents filed in that case,” wrote Jerry Knight, “indicate
Darwaish’s troubles in Abu Dhabi were known weeks and perhaps
months before he and his partners bought control of Financial General
but were never disclosed to bank officials, stockholders, or regulatory
agencies.” He went on to say that the SEC and the Fed were never
informed, according to sources at those agencies.

The same day this story appeared, Michael Bradfield, the Fed’s
general counsel, wrote to Clifford to ask for more information. In a
reply dated August 16, Clifford stressed that Darwaish owned no
shares in the company but was merely representing Zayed’s son Mo¬
hammed, adding that Mohammed would be handling his own invest¬
ments in the future. Clifford denied that any information had been
withheld from regulatory agencies. He branded the Post's story “inac-

*In March 1989, the New York Court of Appeals ruled unanimously that Zayed
couldn’t press his claim because he had refused to be deposed in the case. Darwaish was
released from house arrest after a short time but was apparently forbidden to leave the
UAE. Aslam remained in custody until October 1990.

FALSE PROFITS

62 )

curare, misleading, unwarranted, and irresponsible” and said that he
had informed Benjamin Bradlee, the executive editor, of “the gross
inaccuracies in the article.” If the Fed had done some checking, it
would have found that the Post's story was entirely accurate. Despite
Clifford’s supposed complaint to the newspaper, the Post published no
correction, letter to the editor, or follow-up article.

The Darwaish affair raised an obvious question: Had the regulators
been misled about anything else? It appears that the Fed was disin¬
clined to ask. The affair was apparently treated as nothing more than
an unpleasant incident rather than a warning sign.

The Underground
Empire

The takeover of First American Bankshares was a remarkable
achievement for Abedi. A group of BCCI clients — including several of
the bank’s most important stockholders — now controlled a major
banking company in the American capital. Abedi had also forged close
ties with Clark Clifford, one of the most powerful figures in Washing¬
ton and a potential bridge to America’s political establishment. This
was bound to enhance Abedi’s standing in the eyes of Sheikh Zayed,
his chief patron. In 1980, the same year that First American agreed to
be acquired, Zayed named Abedi to a new investment committee
responsible for managing billions of dollars of Abu Dhabi’s funds. He
was the only non-Arab on the committee — indeed, the only member
from outside the UAE.

With Zayed’s backing, BCCI continued to expand its international
network in industrial countries and throughout the Third World. By
the end of 1983, eleven years after the bank was founded, Abedi had
achieved his dream of a global bank. The international network con¬
sisted of 360 offices in sixty-eight countries. Of these, 91 were in
Europe, 52 in the Americas, 47 in the Far East, South Asia, and
Southeast Asia, 90 in the Middle East, and 80 in Africa. The annual
report for that year stated proudly: “The Group’s network now cov¬
ers most of the principal financial trade and money centres of the
world.”

In Africa, BCCI’s network extended from Cameroon in the west to
Kenya in the east, from Djibouti in the north to Swaziland in the south.
The Indian Ocean tourist mecca of Seychelles had a BCCI branch, as
did the impoverished nation of the Sudan. By the end of 1987, BCCI

( 63 )

FALSE PROFITS

6 4 )

had operations in twenty African countries. The biggest was in Nige¬
ria, where BCCI had dozens of branches. BCCI was unquestionably
the most important foreign bank in Africa.

In some countries, BCCI was regarded as a local bank, since it had
taken over domestic institutions, as it did in Hong Kong. In 1983,
BCCI bought a Colombian bank as well as a 26-branch Spanish bank,
Banco de Descuento S.A., which was renamed Bank of Credit and
Commerce S.A. Espanola. A former official of the Spanish unit says
that important clients were treated to the ultimate in service. One
client, he says, was a wealthy Arab who liked to gamble at the casino
in Marbella. If the customer ran out of cash, a BCCI officer would
open the branch at midnight to obtain currency.

BCCI did not buy any banks in the United States — its clients took
care of that — but it did open branches and representative offices
across the country. The bank made its American debut in 1978 with a
representative office on Park Avenue in Manhattan. Since such offices
were limited in what they could do, Abedi sought permission to open
“agencies” in the United States. (Under U.S. law, foreign bank agencies
have fewer privileges than full-fledged branches.) The first BCCI agen¬
cy was opened in San Francisco in 1981. It was followed by six more
agencies."* BCCI’s Miami office was the headquarters for Latin Amer¬
ica and the Caribbean.

By the end of 1988, BCCI’s network included 417 offices in seventy-
three countries. The annual report noted that the bank now served 1.3
million customers through 14,000 staff members of ninety nationali¬
ties. Total assets had soared to $20.6 billion — a hundredfold increase
in fifteen years. Although these numbers were impressive, they actually
understated the size and scope of BCCI’s empire. Not mentioned in the
annual reports were several other institutions with very close ties to
BCCI — a kind of underground empire.

When Abedi’s Arab clients sought approval to buy First American
Bankshares, they told the Fed that BCCI would have no role in fi¬
nancing the takeover. Some of the money to buy the stock was bor¬
rowed from Banque Arabe et Internationale d’Investissement (BAII).

What was BAII? More important, was the Fed correct in regarding it
as unaffiliated with BCCI? BAII was founded in Paris in 1973 as a

*BCCI’s other U.S. agencies were opened in Miami (1982), Los Angeles (1983), Palm
Beach (1983), Tampa (1984), New York (1984), and Boca Raton (1986). The agencies
were supplemented by representative offices in Chicago (1984), Houston (1984), Washing¬
ton (1984), and Beverly Hills (1985).

The Underground Empire ( 65

consortium bank — that is, an institution owned by several other
banks. Like BCCI, BAII was owned by a Luxembourg holding com¬
pany but had its headquarters elsewhere. In BAIFs case, it was in
Paris’s glorious Place Vendome, a stone’s throw from J. P. Morgan &
Company’s grand French headquarters. Another similarity with BCCI
was its parentage. Bank of America was a founding shareholder in
BCCI and the only major U.S. bank to hold stock in BAIL

Perhaps the most important connection, though, was through a man
named Yves Lamarche, BAII’s longtime chief executive. Lamarche had
been a senior official of Bank of America and had encouraged it to
invest in Abedi’s bank. He then joined BCCI’s board of directors, re¬
maining on the board after moving to BAIL Lamarche was more im¬
portant in BCCI than his position on the board would imply. During
its early years, BCCI had only a few directors. At one point its Luxem¬
bourg holding company had just three directors: Abedi, a Swiss politi¬
cian named Franz Muheim, and Lamarche, who also became “a close
friend and confidant of Mr. Abedi,” according to a former BCCI
executive.

On an operational level, there were a number of ties between the
two banks. On many occasions, BAII popped up in BCCI-related
deals. The financing of the First American takeover in 1982 was one
example. Three years later, Ghaith Pharaon borrowed from BAII in
order to buy a small California bank. It was later discovered that the
real lender was BCCI, with BAII acting as a front.

While BCCI and BAII were very close, other entities had even closer
ties to Abedi’s bank, including financial institutions, industrial and
service companies, and nonprofit organizations. Some of them were so
closely associated with the bank that even low-level staff members
regarded them as de facto affiliates of BCCI.

Each of these “satellites” had most — sometimes all — of the fol¬
lowing characteristics:

• BCCI was involved in founding or acquiring it.

• Its shareholders were Arab investors with close ties to BCCI.

• Its shareholders were passive investors.

• BCCI provided financial support to the entity and/or its share¬
holders.

• Its officers had close ties to BCCI.

• Its logo resembled that of BCCI.

• It did a great deal of business with BCCI and with other BCCI
satellites.

FALSE PROFITS

66 )

Attock Oil, in London, was a drilling, refining, marketing, and
oil-trading company that was particularly active in Pakistan. In 1977,
it was taken over by a group of BCCI-related investors, including men
who later invested in U.S. banks with BCCI’s help: Ghaith Pharaon,
Kama! Adham, and Faisal Saud al-Fulaij. All three men wound up on
Attock’s board, with Pharaon as chairman. Another board member,
Hasan Mahmood Kazmi, served as general manager of one of BCCI’s
most important units. International Credit and Investment Company
(Overseas) Ltd., in the Cayman Islands.

Though Pharaon was chairman of Attock, he was seldom seen by its
employees. “In terms of the day-to-day running of the business,” says
a former employee, “he was not involved or informed.” Most deci¬
sions were made by Pakistanis recruited from BCCI, including an
executive named M. A. Baqi. Baqi also had a family connection to
BCCI: his brother-in-law was Agha Hasan Abedi.

Cromwell Hospital, in the Earl’s Court section of London, was built
at Sheikh Zayed’s request and owned by dummy companies that Za-
yed controlled. Abedi handled all the details, recruiting doctors from
Pakistan (including his personal physician) and Britain. While con¬
struction was in progress, Abedi provided the doctors with offices at
the bank’s headquarters as well as BCCI cars and drivers. “They spent
two years in 100 Leadenhall Street,” says a BCCI official.

International Travel Corporation (ITC), a London travel agency
with offices in Pakistan, had its headquarters in BCCI’s main office.
Outlets of the travel agency shared space with other BCCI offices in
London. Employees of BCCI and some of the satellites used ITC; in
fact, some were required to use ITC even though they could have
gotten cheaper tickets elsewhere.

South Publications, a company financed by BCCI, owned a monthly
magazine called South and a quasi-academic journal called the Third
World Quarterly. The man in charge, Altaf Gauhar, also ran a charita¬
ble organization sponsored by BCCI, the Third World Foundation. As
we shall see, the foundation and the publications served as promo¬
tional tools for the bank.

Capcom Financial Services Ltd., a commodity futures and invest¬
ment management firm in London, was founded in 1984. Its stock¬
holders included several BCCI shareholders, and it was run by Syed
Ziauddin Ali Akbar, who had headed BCCI’s treasury department in
London and brought several BCCI people with him to the firm. There
is also a family tie: Swaleh Naqvi, Abedi’s right-hand man, was mar¬
ried to Akbar’s sister.

The Underground Empire ( 67

While most of the BCCI satellites were in London, some of the most
important ones were in the United States.

When Pharaon and Lance held a press conference in December 1977
to answer questions about the National Bank of Georgia takeover, an
Atlanta reporter asked Lance about a promise he had made to keep
NBG in Georgian hands. Glancing at Pharaon, the banker said, “We
want to make a Georgian out of him.” Although the remark was
obviously made in jest, things almost turned out that way. After the
takeover, Pharaon developed close ties to the Peach State, using it as
the base for his U.S. operations, which included investments in several
parts of the country. His U.S. holding company, Interedec Inc., was in
Savannah. He also purchased Richmond Hill, a spectacular estate near
Savannah that had once been owned by Henry Ford, and he spent a
fortune restoring it. “He loved this old plantation and the style he’d
seen in Gone With the Wind,” says a former associate.

Pharaon was well on his way to becoming a Georgian — at least an
honorary one. In fact, although his business interests were scattered
around the world, he spent several months each year in Georgia.
However, there was one company he seldom visited: National Bank of
Georgia. After acquiring the bank in 1978, Pharaon became an absen¬
tee landlord, turning over its management to a group of professional
bankers, many of whom had close ties to BCCI.

When Pharaon bought the bank, the president and CEO was an
experienced banker named Robert P. Guyton. In late 1979, Guyton
was forced out and replaced by a former Bank of America executive,
Roy P. M. Carlson, who also became chairman. (He gave up the title of
president in 1986.) Carlson’s ties to Abedi stretched back several years,
as noted in Chapter r. Before Abedi launched BCCI in 1972, he had
outlined his plans to Carlson, then head of B of A’s Mideast-Africa
region. After B of A agreed to invest in the new bank, Carlson became
responsible for monitoring the investment and often traveled with
Abedi in the Middle East. Before Pharaon hired Carlson for the NBG
job, Carlson met with Abedi in London. Carlson had a further link to
BCCI. From 1975 to I 979? he was the managing director of Melli
Industrial Group in Iran, a company controlled by Mohammed Rahim
Motaghi Irvani, a prominent businessman with close ties to BCCI.
(Carlson declined to comment on his ties to BCCI.)

NBG’s staff also included three Pakistani bankers who had worked
at BCCI. The most senior was Tariq Jamil, the assistant to the chair¬
man. (He later returned to BCCI as regional general manager for the

FALSE PROFITS

68 )

Far East.) Some say that he was the de facto chief executive of the
Georgia bank.

In 1982, NBG’s logo was changed to resemble BCCI’s. Around the
same time, Jamil took part in a scheme for the joint marketing of
NBG’s and BCCI’s services to potential clients. The Atlanta bank
opened a branch in the Cayman Islands and also became involved with
BCCI in Latin American business.

Several years after the NBG takeover, Pharaon bought another
American bank with BCCI’s assistance. This timing was odd because
the transaction occurred when he was suffering from severe financial
setbacks.

After the oil shocks of 1973 and 1979, Saudi Arabia’s most prominent
businessmen were avidly courted by foreign bankers. One big bor¬
rower was Pharaon’s flagship company, Saudi Research 8c Develop¬
ment Corporation (REDEC). The boom times began to end in the early
and mid-1980s, however, when an oil glut caused prices to fall. Saudi
tycoons who had boasted of their “entrepreneurial’" abilities a few
years earlier began to suffer huge losses. In December 1985, REDEC
declared a moratorium on the repayment of principal on its debt. The
following year, after it stopped paying interest, creditor banks agreed
to reschedule $353 million of the company’s debt.

The crisis was a humbling experience for Pharaon. For years he had
flitted around the world in private jets; at one point he owned three
Falcons and two Boeing jetliners. He sold all of his jets and started
using a far less impressive Cessna Citation II. For a globe-trotting
tycoon like Pharaon, it was like checking out of the Plaza Hotel and
moving into Motel 6.

In October 1985 — just two months before REDEC declared a
moratorium on principal payments — Pharaon paid $23 million for
Independence Bank, a small ($220 million in assets) institution in Los
Angeles; its headquarters was in the San Fernando Valley community
of Encino. The timing of the investment was not the only peculiar
feature. The deal had much in common with Pharaon’s purchase of
NBG several years earlier. BCCI officers picked out Independence
Bank and negotiated with the sellers. The purchase was largely fi¬
nanced by Banque Arabe et Internationale d’Investissement, which
had also helped fund the First American takeover. In fact, of course,
the money actually came from BCCI.

After buying Independence Bank, Pharaon became — as with

The Underground Empire ( 69

NBG — an absentee landlord. A Pakistani banker, Kemal Shoaib,
was installed as chairman. He had been a top official of BCCI, su¬
pervising all its activities in North America from its London headquar¬
ters.

Soon there was another strange transaction — the sale of Nation¬
al Bank of Georgia by Pharaon. The buyer? First American Bank-
shares.

First American signed an option to buy NBG in November 1986,
but the takeover could not go through until the Georgia legislature
modified the state’s banking legislation. In recent years, federal laws
banning interstate banking have been eased considerably, but the
states have a great deal of say on takeovers by out-of-state banks.
Georgia permitted such acquisitions, but only if the buyer was from
the southeastern United States. Washington, D.C. — the home of First
American — was not considered part of that region.

In an effort to change the Georgia law, Pharaon mounted an aggres¬
sive lobbying campaign. Inducements of various kinds were alleg¬
edly provided to certain legislators, including campaign contributions,
travel expenses, and lavish entertainment. At a cost of several thou¬
sand dollars, NBG took a group of state lawmakers on a junket
to Florida on January 16-19, 1987. On February 12, the legislation
permitting the takeover passed the Georgia senate by a unani¬
mous vote, 52-0. On March 4, the House passed the bill, 155-4* The
takeover was consummated later that year. Charles Jones, Pharaon’s
politically connected lawyer, was paid “in the vicinity of $1 mil¬
lion” for successfully lobbying the legislature, NBG’s Roy Carlson
later said.

Although Altman has described the purchase of NBG as an “arm’s-
length transaction,” there are grounds for skepticism. At the time,
Clifford indicated that Pharaon’s ties to the owners of First American
may have had something to do with the transaction. “Our investors
encouraged us to consider the purchase,” he said. “They had known of
the ownership being in the hands of Pharaon. They encouraged us to
do it.” Pharaon himself acknowledged the importance of his ties to the
owners of First American. “These are people we have been associated
with for a long time,” he said, referring to Adham and Fulaij. “We’ve
had many contacts with them, so we know them. They said we should
speak to [First American’s) management in Washington, which we did,
and that’s how the deal came through.”

To support the notion of an “arm’s-length” deal, Altman said that

FALSE PROFITS

7° )

Pharaon engaged in serious negotiations with another potential buyer,
NCNB Corp.,* before accepting First American’s offer. One prob¬
lem with that explanation is that NCNB felt the Georgia bank was
worth less than $200 million, yet First American paid considerably
more. In fact, embarrassment about the high price might help to
explain why First American officials not only failed to announce the
purchase price but provided conflicting information about how much
it was.

At the time, the Washington Post reported that First American
had paid about $200 million, citing sources close to the deal. Given
the Post's location, it is likely that this information came from First
American. The Atlanta Business Chronicle , however, gave a much
higher estimate: between $220 million and $240 million. When Alt¬
man was asked about the price in 1989, he said First American paid
$227 million. In a 1988 deposition, however, he had quoted the price
as $255 million. (Altman later said the deposition transcript may have
contained a typographical error.) A Federal Reserve document issued
in July 1992 states that First American paid about $220 million.

Although he disposed of NBG, Pharaon invested millions of dollars
in other U.S. financial institutions. In 1986, he had bought American
Southern Companies, an insurance group in Atlanta. Three years later,
he set up DLF Finance Inc., a company in New York that traded in the
bank debt of developing nations. He also bought a big chunk of one of
the largest savings and loan associations in the country.

The 1980s was a boom time for the savings and loan business, thanks
to the deregulation of the industry by federal and state authorities.
S&Ls that had once been restricted to providing home mortgages and
personal loans were now permitted most kinds of lending. Since depos¬
its were insured by the federal government, even the most badly run
S&Ls had no trouble collecting money — as long as they paid higher-
than-average interest rates. And they were not restricted to raising
funds locally; they collected money nationwide by using Wall Street
firms as deposit brokers. In order to earn the high returns necessary to
pay the high interest to depositors, S&L managers financed risky real
estate projects and bought billions of dollars in junk bonds. Deregula¬
tion also lowered barriers to entrepreneurs who wanted to enter the

*NCNB Corp. was the parent company of North Carolina National Bank and several
other banks. In 1991, it merged with a bank holding company called C&cS/Sovran to form
NationsBank.

The Underground Empire ( 71

industry. In some states, regulators made it so easy to buy or start an
S&L that people with no banking experience entered the business.
Some of them even had criminal records. It was, in short, a recipe for
disaster. Since the late 1980s, taxpayers have been forced to spend
hundreds of billions of dollars to rescue depositors in failed savings
and loan associations.

One of the most notorious S&Ls was CenTrust Savings Bank of
Miami. It had been a relatively obscure institution called Dade Savings
and Loan until 1983, when a wheeler-dealer named David L. Paul took
it over. He changed the name, installed himself as chairman, and
embarked on a campaign to transform it into the largest S&L in the
country. CenTrust did grow quickly — it eventually became the biggest
S&L in the Southeast — but its portfolio was filled with junk bonds
purchased from Drexel Burnham Lambert. Paul also drained money
out of CenTrust by awarding himself a huge salary and lavish perks
and using depositors’ money to build an art collection — including a
Rubens that he kept at home.

Federal and state regulators were suspicious of Paul’s activities but
were slow to crack down. One possible explanation is that Paul had
impressive connections, thanks to his extraordinary generosity to po¬
litical candidates. A political action committee set up by CenTrust gave
$140,000 to federal and state politicians between 1987 and 1989. The
company gave $131,000 more to other political action committees.
One beneficiary — the Democratic Senate Campaign Committee —
received $30,000. Paul also served as co-chairman of the committee
with Senator John F. Kerry of Massachusetts. Kerry was one of several
politicians who flew on CenTrust’s corporate jet.

In Florida, one big recipient of Paul’s campaign money was Comp¬
troller Gerald Lewis, the state’s chief bank regulator. In a 1991 profile
of Paul, Peter Becker provided details of the banker’s support for
Lewis:

Florida is the only state with a popularly elected bank comptroller,
and David Paul was an active political supporter of Lewis. In June
1986 Paul hosted a fund-raising barbeque at his home. . . . The next
day six of Paul’s companies gave a total of $17,000 to Lewis’s
reelection campaign. Three weeks later Paul took Lewis on a fund¬
raising tour of New York, and in the next five weeks Lewis reported
campaign contributions of $28,500 from New York financial com¬
panies or individuals.*

Lewis later distanced himself from Paul and cracked down on CenTrust.

FALSE PROFITS

7* )

CenTrust’s rise to prominence occurred as BCCI was emerging as an
important bank in Florida. At the same time, David Paul became a
close friend and business associate of Ghaith Pharaon’s. The Saudi
tycoon traveled with Paul on CenTrust’s plane and even vacationed
with him. From 1984 to 1988, according to his records, Paul and
Pharaon were in frequent — sometimes daily — contact. They also
became involved in important business deals. In 1987, Paul, Pharaon,
and the Swiss investor Carlo Gritti spent millions in a secret attempt to
buy control of Hercules Inc., an arms manufacturer in Wilmington,
Delaware. *

That same year, Pharaon bought about one fourth of CenTrust’s
stock, becoming the largest shareholder. His investment came at a time
when CenTrust was in very poor financial shape, and regulators were
pressuring Paul to strengthen the balance sheet by issuing new stock or
bonds. He responded by issuing $150 million in CenTrust junk bonds
through Drexel Burnham Lambert’s Michael Milken, which helped to
allay the regulators’ concerns. What the regulators did not know was
that the offering only appeared to be successful, thanks to a sham
transaction Pharaon arranged with his friends at Abedi’s bank. BCCI
bought $25 million in CenTrust bonds in May 1988, but they were
only parked at BCCI. Two months later, BCCI sold the bonds to a
CenTrust subsidiary. Because of this ruse, the regulators refrained
from shutting down CenTrust.

CenTrust, Independence Bank, and National Bank of Georgia can
all be regarded as BCCI satellites, although CenTrust was not as
closely linked to BCCI as the others. In the case of NBG, even Clifford
and Altman have acknowledged that its ties with BCCI were extraor¬
dinarily close. Altman has said that after First American acquired the
Georgia bank, he found that senior managers had ties to BCCI, that
the bank’s logo resembled BCCI’s, and that BCCI brochures were
sometimes distributed to NBG customers. He and Clifford insisted,
however, that First American was in a totally different category. Al¬
though it was owned by BCCI clients, they said, it was a wholly
autonomous institution.

In fact, First American was the biggest BCCI satellite of all.

*The trio fell out after the October 1987 stock market crash left them carrying huge
losses on their Hercules stock. In 1992., the investment in Hercules was the subject of
litigation between Pharaon and Gritti in state court in Manhattan.

The Underground Empire ( 73

Clifford had grand ambitions for First American. He told the board of
directors in 1984 that he wanted it to be one of the twenty biggest
banks in the country within ten years, and he moved quickly toward
that goal. The company shifted the headquarters of its New York
subsidiary from Albany to New York City and renamed it First Amer¬
ican Bank of New York (FABNY). An impressive office was opened on
Park Avenue. In 1984, FABNY purchased 33 branches of the Bankers
Trust Company in the Albany area, along with about $450 million in
assets. And a few years later, as noted above, National Bank of Geor¬
gia was acquired from Pharaon; it was then renamed First American
Bank of Georgia.

But most of the growth came in the Washington area, fueled by a
booming real estate market. By the end of 1989, First American Bank-
shares had $11.5 billion in assets, making it the largest bank holding
company with headquarters in the Washington area — about 50 per¬
cent bigger than its closest rival, Riggs National Corporation. Nation¬
ally, it was the fifty-second-largest banking company. As the company
grew, memories of the bitter takeover battle faded, as did the once-pro-
vocative questions about the backgrounds and motives of the Arab
shareholders and their ties to BCCI. Most customers probably as¬
sumed it was an American-owned company, thanks in part to the First
American name.

In fact, the management used every opportunity to exploit the patri¬
otic connotations of the name in its advertising and promotion. First
American’s logo, for example, incorporates the Stars and Stripes. In
one commercial, an announcer touted First American’s “All-American
CD” and “All-American Money Market Account” while a fife-and-
drum corps played in the background. The most powerful series of
television commercials began with shots of photographs from family
albums. As one portrait dissolved into the next, a narrator told his
family’s version of the American immigrant saga. The final image was
a group shot of the immigrant’s descendants. The speaker then iden¬
tified his family. In some cases, they were typical American families. In
others, they were the families of well-known Washingtonians, such as
the columnist Robert Novak and the restaurateur Duke Zeibert. The
commercials — a skillful blend of patriotism, nostalgia, and family
values — ended with a voiceover: “Nearly every family can trace its
heritage to one bold first American. We salute the spirit of the first
Americans who made this country their own. We’re First American —
the bank for all Americans.”

FALSE PROFITS

74 )

Officials of First American did more than simply wrap the company
in Old Glory; they went to extraordinary lengths to conceal the identi¬
ties of the company’s shareholders. A handful of names had come out
during the takeover battle — those of Adham and a few others — but
most of the investors had never been identified publicly, and First
American wanted to keep it that way. The efforts at concealment
began even before the takeover was approved. At the Fed hearing in
April 1981, for example, Altman noted, “We had requested that the
names of the minority investors be maintained confidential.” In No¬
vember 1982, the Fed received a letter from Baldwin Tuttle, a lawyer
for First American, asking it to keep the names of the investors secret.
Tuttle wrote a similar letter to the Fed in July 1983.

Further evidence of First American’s sensitivity about its ownership
was displayed when it was defending itself from a lawsuit in 1988. The
Middle Eastern investors, in taking over the company in 1982, did not
acquire 100 percent ownership of all its banking subsidiaries. In 1987,
First American Bankshares decided to buy out the minority sharehold¬
ers in First American of Maryland and First American of Virginia at
$42 a share. Several of the Maryland bank’s investors complained that
the price was too low and took advantage of a state appraisal system to
win a higher price. In Virginia, which had no such system, the dissent¬
ing shareholders went to court. In September 1988, a federal jury in
Alexandria awarded the investors $60 a share. (The verdict was sus¬
tained on appeal, then reversed by the Supreme Court.)

During the discovery phase of the case, the lawyers for the plaintiffs
met stiff resistance when they tried to determine who owned the
company. When the question was put to Altman during a deposition,
he steadfastly refused to provide any names. The attorneys persisted,
and Altman’s lawyer snapped that the identity of the owners was
“none of your business.” When specific names were put to Altman,
however, he did confirm their status as shareholders. In a pretrial
motion, First American went so far as to ask the judge to forbid the
plaintiffs’ lawyers from mentioning in court the names or nationalities
of the shareholders — or even that the company was foreign-owned.
The defense lawyers argued that it was irrelevant to the case, largely
because Clifford and Altman ran the company; the owners played no
role, they said, in setting the price to be paid to minority shareholders.
They also claimed that the disclosure that First American was owned
by Arabs could stir up prejudice in some of the jurors.

First American’s touchiness was understandable. The questions that

The Underground Empire ( 75

had been raised during the takeover battle may have been largely
forgotten, but they had never been satisfactorily answered. Why were
these Arab VIPs so eager to own a banking company in Washington,
D.C.? And were they really the owners — or merely front men for
BCCI?

The Federal Reserve had approved the takeover of First American
based on assurances by Clark Clifford and the Arab investors that
First American would be autonomous of BCCI. After the takeover, an
all-American board of directors led by Clifford was installed to act as
a buffer between the BCCI clients and First American. Clifford, in
turn, recruited several friends to serve on the board with him, notably
his law partner and protege Robert Altman.

There was one obvious flaw in this setup. At the same time that
Clifford was supposed to guard First American from BCCI’s influence,
his law firm was receiving millions of dollars in fees from BCCI. If he
did anything to displease Abedi, the fees could be cut off.

After the takeover went through, there were other indications of a
close relationship between First American and BCCI. First American’s
Arab shareholders were more than simply passive; they were all but
invisible. A former top official of First American said in 1990 that he
knew of only two investors who ever visited the company’s headquar¬
ters in Washington, Kamal Adham and the Saudi banker Khalid Bin
Mahfouz. He met with Adham for no more than five minutes and was
asked nothing about First American’s performance. Adham, in this
man’s opinion, did not act like a major shareholder, let alone the
biggest single investor. When Bin Mahfouz visited, it was to take a tour
of First American’s computer facilities. The former official referred to
the two investors as “the so-called shareholders.”

Further evidence of the investors’ passivity emerged in the course of
the lawsuit filed by former minority shareholders of the Virginia bank.
The lawyers for First American said that its Middle Eastern stockhold¬
ers had been told absolutely nothing about the buyout of the minority
shareholders — a $3 o million transaction. When Altman was deposed,
he was questioned at length about how he communicated with the
company’s owners. He made it sound very haphazard. “Sometimes
some of the investors call me or at times I will contact one of them,” he
said. “At times I will contact all of them.” When asked if there is
“some system of regular reporting to which you adhere,” Altman said,
“No.” One surprising assertion by Altman was that First American’s

FALSE PROFITS

76 )

board of directors never had to ask advance approval from the share¬
holders for anything it did.

BCCI, by contrast, was very much in evidence. Clifford and Altman
were in constant communication with Abedi and other top officials.
Clifford, for example, made an average of two trips a year to London
to meet with BCCI officials. Altman went even more often, sometimes
monthly. The ostensible reason was that BCCI acted as a “communica¬
tions link” between Clifford and the shareholders as well as being their
investment adviser.

First American and BCCI also did a great deal of business with each
other. Forty-seven BCCI branches, subsidiaries, and affiliates main¬
tained accounts at First American Bank of New York. Since FABNY
was a relatively small and obscure institution, it was an unusual
choice — unless, of course, BCCI viewed it as an affiliate.

The first president of FABNY, a former Bank of America executive
named Bruno Richter, was hired in 1983 after three meetings with
Abedi. It was only after the last meeting that he was introduced to
Clifford and Altman, who then offered him the job. Not long after
Richter took over, he hired two BCCI executives as senior officials of
FABNY at Abedi’s recommendation. Aijaz Afridi left his job as a
general manager of BCCI’s Swiss subsidiary to become an executive
vice president. (Fie later returned to the BCCI group to run its Spanish
subsidiary.) Khusro Elley, who ran BCCI’s representative office in New
York, became FABNY’s executive vice president and chief financial
officer, making him one of the bank’s top three officials.

While employed by First American, neither Elley nor Afridi com¬
pletely severed his ties to BCCI. Both men used BCCI mortgages to
finance houses in suburban Scarsdale, New York. Afridi received bis
mortgage in December 1983, just months before he joined First Amer¬
ican. The terms were extremely generous. There was no down pay¬
ment, and the interest rate was 5 percent on the first $100,000, 7
percent on the next $50,000, and one percentage point over Citibank’s
base lending rate on the remainder. When asked about the mortgages
in 1989, Altman said he did not know whether BCCI required employ¬
ees to repay concessionary loans when they left the bank. He suggested
that Afridi may have been permitted to keep the mortgage because
BCCI wanted to avoid expensive paperwork.

BCCI did have a policy on concessionary loans: departing employ¬
ees were required to refinance such loans. For example, one employee
who resigned in 1989 received a letter from the personnel department

The Underground Empire ( 77

stating that he must repay all concessionary loans he received from the
bank. The letter contains this statement of the bank’s policy: “As you
are aware, it is a condition of a staff concessionary loan, that these
facilities be repaid immediately on leaving the employ of the Bank.”
Even if Altman’s theory was right, it did not explain the concessionary
mortgage to Khusro Elley. He received the cheap loan in July 1984,
when he was a First American employee .

During Afridi’s and Elley’s tenure at First American, many former
BCCI colleagues continued to regard the men as part of the BCCI
family. As a BCCI official put it, Afridi and Elley did not really quit
BCCI to work for an unrelated bank; they were transferred to First
American by Abedi. This sense of kinship was reinforced at BCCI’s
annual management conferences. As noted earlier, hundreds of em¬
ployees from around the world were flown in to attend these events.
The guests also included members of BCCI’s extended family: repre¬
sentatives of Attock Oil, Capcom Financial Services, Cromwell Hospi¬
tal, National Bank of Georgia — and First American Bankshares.

When BCCI’s Arab clients invested in National Bank of Georgia and
First American, many observers suspected that they had political mo¬
tives. As the Washington Post said in an editorial: “Mr. Lance’s
wealthy new friends from the Middle East may well be under the
impression that they are buying, along with the stock, a degree of
access to political power in this country.”

Abedi and his clients insisted that there was no hidden political
agenda; the Arab investors were merely recycling some of their petro¬
dollars to the U.S. economy. That view was echoed in congressional
testimony by such respected figures as Henry Wallich, a member of the
Federal Reserve Board, and Joseph Sisco, a veteran State Department
official.

Anyone who believed that it was nothing more than a business
transaction did not know Abedi, for he was obsessed with power. He
was a collector of people, and he used his connections to build BCCI’s
global network. The network — which now included the largest bank¬
ing company in Washington, D.C. — became an instrument for ac¬
quiring still more power.

Friends in
High Places

Thro ugho ut his career, Agha Hasan Abedi cultivated prominent
people, using the skills he had learned growing up in a family of
courtiers in India. His techniques varied, depending on the object of
his desire. Some people could be won over through contributions to a
pet charity. For others, a briefcase full of banknotes was more effec¬
tive. In between, there was a range of inducements: flattery, travel
expenses, favorable press coverage, legal fees, jobs, consultancies, bus¬
iness deals, political favors, loans on highly favorable terms, or
“loans” that were not intended to be repaid.

Abedi made his first important contacts in India and Pakistan, then
extended his reach into the Arab world. Eventually he could boast of
connections with government leaders and international statesmen the
world over. In Third World countries, his contacts included high-level
government officials in the Middle East, black Africa, and Latin Amer¬
ica. In Europe, current and former heads of government were close to
BCCI. In the United States, BCCI insiders had ties to prominent figures
in both the Democratic and Republican parties, including at least three
presidents: Richard Nixon, Jimmy Carter, and George Bush.

Friends of Abedi’s helped him expand the BCCI network. Like the
medieval alchemists — who claimed to convert base metals into
gold — Abedi transformed the financial and political power of his
backers and allies into an international financial empire. The network,
in turn, was used to acquire still more political influence, which could
protect the interests of the bank and advance the political agendas of
Abedi’s backers.

( 78 )

Friends in High Places ( 79

Abedi honed his approach in Pakistan during his days at United Bank,
when he courted Arab VIPs. One way he earned goodwill was by
procuring sexual companions for them. When Sheikh Zayed visited
Pakistan, Abedi would provide young Pakistani girls to members of
the ruler’s entourage. A Pakistani woman named Begum Asghari Ra¬
him was in charge of the prostitution operation, according to former
associates of Abedi’s.

Rahim recruited these “dancing girls,” as they are called in Pakistan,
by going to poor villages and making payments to their families. The
girls were typically between sixteen and twenty years old, but some
were even younger; a few had not reached puberty. Rahim would
purchase fine clothes and jewelry for them and teach them how to
behave as sexual companions for Arab sheikhs.

Abedi procured boys as well as girls. One prominent member of a
UAE ruling family is widely reputed to be a homosexual with a pen¬
chant for underage males. “So BCCI brought boys from Peshawar,”
says a former bank official. “That’s the rumor in BCCI.” Pathan boys
from the area around Peshawar — a city near the Afghan border in
Pakistan’s Northwest Frontier Province — are considered particularly
desirable by pedophiles, explained a former BCCI banker as his wife
quoted a homosexual love poem that compares a Pathan boy’s bottom
to a peach. Abedi’s involvement was so widely known that some
Pakistanis used to refer to him as “the great pimp.”

Despite his success in the Gulf, Abedi suffered setbacks in Pakistan.
In 1971, as noted earlier, President Bhutto"' nationalized the banking
industry and arrested Abedi. Many Pakistanis who were harmed by
Bhutto’s policies joined the political opposition. Abedi, however, never
liked to make enemies of the powerful, so he sought a rapprochement
with Bhutto. During the general election of March 1977, Abedi chan¬
neled 20 million to 30 million rupees (between $2 million and $3
million) to Bhutto’s Pakistan People’s Party, according to a govern¬
ment white paper issued after Bhutto’s fall from power. The document
included an affidavit signed by Afzal Said Khan, a secretary of Bhut¬
to’s, alleging that Abedi made frequent trips to Pakistan, “loaded with
bagfuls of money”; the cash was for “election purposes.” The white
paper charged that the money came from “a foreign head of state” —
believed to be a reference to Sheikh Zayed. If that is true, the financing
enhanced the political clout of both Abedi and Zayed.

* After a new constitution was enacted, Bhutto became prime minister in 1973.

FALSE PROFITS

8o )

Four months after the election, however, Bhutto was overthrown in
a military coup led by General Mohammed Zia-ul-Haq, the army’s
chief of staff. Always adaptable, Abedi began to court General Zia and
members of his regime, with impressive results. Abedi’s first major
accomplishment was to persuade the dictator to permit a group of
investors connected with BCCI to take control of Attock Oil, Paki¬
stan’s leading oil company. Attock had begun developing petroleum in
Pakistan during its colonial days under Britain. Many Pakistanis had
felt that Bhutto should nationalize the firm’s Pakistani operations
because of its strategic importance. Nevertheless, Bhutto had not only
left Attock in the private sector, he had permitted a BCCI affiliate
called Kuwait International Finance Company (KIFCO) to acquire 16
percent of the company. The deal was done in March 1977, the same
month Bhutto won reelection with — alleged — financial support
from Abedi. Three months after the July coup, the Zia regime allowed
KIFCO to acquire 51 percent of Attock. 51 *

Zia’s dictatorship was extremely repressive. Zia jailed Bhutto and
put him on trial for what were widely regarded as trumped-up murder
charges. In March 1978, he was convicted and sentenced to death,
provoking worldwide protests and appeals from foreign leaders to
spare his life. Zia ignored these pleas, and Bhutto was hanged in April
1979 -

The execution helped to turn Zia into something of an international
pariah. Another black mark — particularly in Washington — was
Pakistan’s nuclear program, which American officials believed was
aimed at developing a nuclear bomb. The same month Bhutto was
executed, the U.S. government suspended economic and military aid to
Pakistan.

The loss of U.S. aid was a serious blow since the country was
suffering from a foreign exchange crisis, putting the very survival of
Zia’s regime into question. At this point, BCCI stepped in with a $100
million loan to the government’s Rice Export Corporation. BCCI also
secretly lent Pakistan’s central bank $25 million to inflate its foreign
currency reserves, according to BCCI’s Nazir Chinoy. This markedly
increased Pakistan’s access to credits from the World Bank and the
International Monetary Fund, Chinoy said. BCCI’s assistance helped

*At the tune, BCCI owned 49 percent of KIFCO. Other shareholders were BCCI clients
who later bought into U.S. banks: Chaith Pharaon, who bought National Bank of Georgia,
and two of the lead investors in First American, Kamal Adham and Faisal Saud al-Fulaij.

Friends in High Places ( 81

Zia contain the financial crisis and cling to power. “Abedi,” in the
words of one expert on Pakistan, “saved Zia’s financial neck.”

BCCI’s bailout was just one of countless ways in which Abedi ingra¬
tiated himself with the Zia regime. Abedi was unstinting in his gener¬
osity to Pakistani officials, showering gifts and favors on even middle-
level bureaucrats. BCCI sometimes arranged for free medical
treatment at London’s Cromwell Hospital, one of the BCCI satellites
mentioned earlier. A former BCCI officer jokes that Cromwell treated
“just about every Pakistani bureaucrat who had a heart attack.”

Many Pakistani officials visited London at the bank’s expense. Upon
arriving, they might be met by a chauffeur who would take them into
town in a limousine. Cash for “expenses” might also be provided. The
Pakistanis — like government officials and BCCI customers from
other countries — could also take advantage of the kind of “lavish
entertainment” Abedi provided when he ran United Bank. In those
days, the job of finding prostitutes was, in effect, “contracted out.”
After BCCI was established, it was handled by bank employees. “It’s a
separate part of the bank,” said one source. “It’s become institutional¬
ized within the bank.” The operation was run out of an office in
London known as the Special Handling Unit. If a BCCI customer
wanted a woman during a visit, he could simply call a certain tele¬
phone number and say something like: “I’m a special client of the
bank. I’d like a car and I want some other services, too.”

Abedi also provided jobs to an extraordinary number of Pakistani
officials. Some became employees or consultants to BCCI; others
joined organizations connected with the bank. One example is Saghir
Anwar, a top intelligence official who had terrorized the Bhutto family.
Bhutto’s daughter Benazir wrote in her memoirs of the traumatic
morning of September 3, 1977, when soldiers led by Anwar burst into
her parents’ home, brandished weapons, and terrified the family. After
rushing to her parents’ bedroom, she saw what she described as

a fat thug of a man lolling on one of Mummy’s delicate blue and
white brocade Louis XV chairs. “Who is he?” I whisper to my father.
“Saghir Anwar, Director of the Federal Investigative Agency,” he
tells me. “Do you have an arrest warrant?” my father asks the FIA
Director. “No,” he replies awkwardly, looking down at the carpet.
“Then under what charge are you taking me from my home?” my
father asks. “I am following orders to take you to military head¬
quarters,” Anwar says. “Whose orders?” my father asks. “General
Zia’s,” the man replies.

FALSE PROFITS

82 )

Anwar later left government service to become head of London’s
International Travel Corporation, the BCCI satellite.

An even more prominent example is Ghulam Ishaq Khan. During
Zia’s years in power, he was the dictator’s principal adviser. He held
several senior posts, including finance minister, chairman of the Sen¬
ate, and secretary-general of the cabinet. He was, according to the Far
Eastern Economic Review, “one of the few who knew of the decision
to hang Bhutto long before the execution.” In the early days of the
regime, Ishaq Khan, as finance minister, was involved in approving the
1977 takeover of Attock Oil by BCCI-related investors. In 1981,
Abedi set up a nonprofit organization in Pakistan called the BCC
Foundation, and installed Ishaq Khan as chairman. After Zia’s death
in 1988, he became acting president of Pakistan and then president.’ 1 '
He remained chairman of the BCC Foundation.

Many other Pakistanis were scooped up by BCCI after leaving the
government, including central bank officials, military men, and am¬
bassadors. Examples include Rashid Ahmed, the governor of the State
Bank of Pakistan; Naziruddin Ahmed, the executive director of the
State Bank of Pakistan; Ali Pirbhai and Mushtaq Yousufi, the ex-chair¬
men of the Pakistan Banking Council; Dr. Mahbubul Haq, the finance
minister; General Rahimuddin Khan (retired), the chief of the military
staff and a relative of Zia’s; Akram Shaikh, the chief of the intelligence
bureau; I. H. Usmani, the chief of the Pakistan Atomic Energy Com¬
mission; Yunus Khan, the ambassador to China; H. U. Beg, the senior
civil servant in the finance ministry; Majid Mufti, a secretary in various
ministries; and the ambassadors Iftikhar Ali and Sultan Mohammed
Khan.

BCCI’s relationship with the Zia regime was so close that it is almost
surprising that the dictator himself didn’t get a job with the bank.
However, the general’s son, Ijaz Zia-ul-Haq, was hired in 1978 by
BCCI’s most important Western banking partner, Bank of America. He
later became a vice president and regional manager of B of A, based in
Bahrain.

Within a few years of Zia’s coup, Abedi achieved such a high status
that when he traveled to Pakistan he was treated almost as a visiting
head of state. A limousine would pick him up at the airport and whisk
him to the presidential palace. The banker and the dictator became

*LJndcr the current constitution, the president is the head of state. The government is
led by the prime minister.

Friends in High Places ( 83

close on a personal level. According to a former BCCI official, “Zia
and Abedi were the closest of personal friends — if Zia ever had a
friend. He was a very religious and introverted man.” Zia consulted so
frequently with Abedi that the banker was widely viewed as one of his
principal advisers. “The relationship was so close,” says the former
official, “that everyone amongst the elite knew that if they wanted a
change in an economic policy or a different job within the government,
the way to do it was to go to Mr. Abedi in London.”

In the United States, Jimmy Carter benefited from the largesse of BCCI
and Pharaon. When Abedi met Carter’s friend Bert Lance, the Georgia
banker was close to bankruptcy, as we have seen, and Abedi came to
the rescue by hiring him as a consultant and arranging for Pharaon to
buy his National Bank of Georgia stock. Not surprisingly, Lance and
his new friends claimed that they were involved in routine business
dealings with absolutely no political strings attached. At a press con¬
ference in December 1977, Pharaon denied that he was trying to get
close to the president by helping one of his best friends: “I would not
be where I am today if I had to do things like that.”

Under Lance, NBG had been the biggest single lender to Carter’s
family peanut warehouse business, and it remained a big creditor
after Pharaon took over in early 1978. Spokesmen for Carter have
insisted that all borrowing was done at market rates of interest. In the
early 1980s, Abedi used his friendship with Lance as a bridge to
Carter.

When Carter left the White House, he refused to cash in on his status
as a former president by joining corporate boards, in contrast to his
predecessor Gerald Ford. Carter has also been compared favorably to
Ronald Reagan, who accepted $2 million in speaking fees from Japan¬
ese companies during a brief trip to Tokyo in 1989. Nevertheless, it
was possible to approach Carter in a different manner: by donating
money to his favorite causes.

Carter and Abedi are believed to have met for the first time after
Carter’s presidency ended in January 1981. Bert Lance, not surpris¬
ingly, made the introduction, but there is some discrepancy about the
date.* He said he introduced Abedi to Carter for several reasons. One
was that the banker’s daughter, Maha, wanted her picture taken with

*Lance says the meeting occurred in August 1982. However, Lord Callaghan, the former
British prime minister, has said that he met Abedi through Carter the previous year.

FALSE PROFITS

84 )

Carter and his wife, Rosalynn. In addition, Carter was raising money
for his presidential library in Atlanta, and Abedi was a potential donor.
Finally, said Lance, Carter was involved in humanitarian programs in
Africa and other parts of the developing world. “Mr. Abedi,” said
Lance, “had banking institutions there and could be helpful.”

Lance flew to Albany, Georgia, with Abedi, his wife, Rabia, and
their daughter and drove to Carter’s home in Plains. “There was an
immediate relationship that developed between the two of them,” said
Lance. “You could sense it as they talked to each other there in the
living room of the Carter residence. That was where that relationship
began.” They all drove to the airport together, and Abedi showed the
former president BCCI’s corporate jet.

Shortly after that meeting, Abedi contributed $500,000 to the Car¬
ter Presidential Center, as the library is called. The donation, said
Lance, was in the form of a cashier’s check, placed in “a plain white,
unmarked envelope addressed to the Carter Center in care of Jimmy
Carter in Plains.” Later, BCCI gave another $300,000 to the center.
Other donations were made by parties related to the bank. The Saudi
arms dealer Adnan Khashoggi, a BCCI client, financed a fund-raising
event for the library. Clark Clifford is listed in a Carter Center bro¬
chure as a donor in the $5,000-$$),999 category. When the center was
dedicated in 1986, Abedi was a guest of honor.

BCCI played a much bigger role in Global 2000, a nonprofit organi¬
zation established at the Carter Center in 1986 to carry out health and
agricultural projects in the Third World. Over the years, BCCI became
the largest single donor, giving $8 million. In addition, the Abu Dhabi
Investment Authority, which is controlled by Sheikh Zayed, has given
at least $2.5 million to Global 2000. Abedi also played a role in
running the organization. Carter served as chairman of Global 2000;
Abedi was one of two “co-chairmen,” with a Japanese businessman
named Ryoichi Sasakawa.* The organization’s British office was at
BCCI’s London headquarters. Finally, some of Global 2000’s projects
were done with Abedi’s BCC Foundation in Pakistan.

Abedi and his bank were not only financial pillars of Carter’s chari¬
table ventures; Carter and the banker became close, traveling around
the globe in BCCI’s Boeing 707. (The luxurious plane boasted a pan-

*Sasakawa has been a prominent supporter of extreme right-wing elements in Japan
since the 1930s. (He once described himself as the country’s “wealthiest fascist.”) After
World War II, he was imprisoned by the Americans as a “class A war criminal.”

Friends in High Places ( 85

eled library, a master bedroom with a bathroom, and a sumptuous
living room with sofas, armchairs, and a large world map with red
lights indicating each of BCCI’s hundreds of offices.) Abedi and Carter
made a five-country African tour in 1986, visited Pakistan that same
year, and returned there in 1987, when they were entertained by
General Zia.

In the spring of 1987, Abedi took Carter and his wife on a world
tour, with stops in London, Hong Kong, Tibet, Peking, and Moscow. It
was “almost a social trip,” with big dinners scheduled at every stop,
said Bill Kovach, a former editor of the Atlanta Constitution, who
went on part of the trip. He later told a reporter that Carter and Abedi
were not only friends but that the former president talked about the
Pakistani banker “almost like a religious figure.” Abedi and Carter
were treated as equals by all the government officials they met, accord¬
ing to Kovach. He said that Abedi was excluded from meetings only
when Carter raised issues that the State Department had asked him to
discuss with Asian leaders.

Abedi’s investment in Jimmy Carter paid big dividends. Inside
BCCI, it boosted the banker’s image, contributing to the personality
cult. The staff magazine, BCC International, was filled with photo¬
graphs of Abedi hobnobbing with Carter and other dignitaries. Out¬
side the bank, it helped to burnish BCCI’s image through a process that
could be called “innocence by association.”

One person in Carter’s circle who met Abedi was Andrew Young.
(Young says he doesn’t recall who made the introduction, although he
said it may have been Ghaith Pharaon.) His resume would have been
extraordinarily attractive to a man like Abedi. An ordained minister,
Young had been a top aide to Martin Luther King, Jr., and a prominent
civil rights leader in his own right. Later, as a congressman from
Georgia, he was Carter’s strongest black supporter during the 1976
presidential campaign. Young became Carter’s ambassador to the
United Nations, where he forged close ties to Third World leaders, but
he was forced to resign in 1979 f° r having unauthorized meetings with
members of the Palestine Liberation Organization. As a result, he is
widely viewed in the Arab world as a victim of America’s pro-Israel
lobby.

From 1981 to 1989, Young was mayor of Atlanta, and he spent
much of his time traveling abroad to attract foreign investment to the
city. At the same time, he headed a consulting firm called Andrew
Young Associates. One of his clients was BCCI. “Young,” according to

FALSE PROFITS

86 )

a former official, “used to come to London a lot to meet with Abedi
and talk about Third World politics.” In 1986, he accompanied Abedi
and Carter on their swing through Africa.

The relationship was highly profitable to Young. He not only re¬
ceived a $50,000 annual retainer from BCCI, he accepted travel ex¬
penses from the bank and from parties connected to it. When he visited
Saudi Arabia and the UAE in 1983, part of his expenses were paid by
the UAE government. In addition, NBG paid part of his hotel bill in
Dubai. In the late 1980s, says a former BCCI official, “he came to
France as a guest of BCCI.”

NBG gave Young’s consulting firm a line of credit, which was trans¬
ferred to BCCI’s Panama branch in 1985. Five years later, when Young
was making an unsuccessful bid for the governorship of Georgia, the
loan balance of $150,000 was forgiven by BCCI.

Several BCCI insiders made high-level connections in the United
States. Ghaith Pharaon’s mansion near Savannah was the site of glit¬
tering parties that attracted such political figures as Andrew Young
and Alexander Haig, President Reagan’s first secretary of state. In
1983, Pharaon brought Jimmy Carter and his wife to Savannah to
attend a fund-raising event for the symphony, historical society, and
ballet. When the event failed to raise sufficient funds, Pharaon wrote a
check to make up the difference.

NBG officials were also active politically. Tariq Jamil — the former
BCCI official involved in running NBG — got to know several Georgia
politicians. NBG’s chairman, Roy Carlson, became active in Republi¬
can politics. Although he identifies himself as a Democrat in his Who's
Who in America entry, he backed Ronald Reagan’s bid for the White
House. Carlson was the only Georgia resident on the 1980 National
Steering Committee of Democrats for Reagan.

Pharaon’s friend and business associate David Paul, the head of
CenTrust Savings Bank, was involved with Pharaon in a donation to
the Carter Center. Pharaon was approached for a contribution because
“he was flashing a lot of money around,” explained James Brasher, a
fund-raiser for the center. In the spring of 1987, the Saudi was invited
to lunch at the center and he brought Paul with him. Pharaon im¬
pressed Carter’s aides as “bright, articulate,” and “extremely well
educated,” Brasher said. Pharaon described how his father had once
saved the life of the king of Saudi Arabia. After the lunch, CenTrust
contributed $ 100,000 to the Carter Center with instructions to “credit

Friends in High Places ( 87

it to Ghaith Pharaon.” Pharaon is believed to have reimbursed Cen-
Trust for the donation.

Abedi’s relationship with Carter helped him make connections outside
the United States. Carter introduced Abedi to Lord (James) Callaghan,
Britain’s prime minister from 1976 to 1979. Abedi channeled money
into one of his pet causes, the Cambridge University Commonwealth
Trust, of which Callaghan was a trustee. In addition, BCCI hired him
as an adviser and paid some of his foreign travel expenses. Masihur
Rahman, BCCI’s chief financial officer, has recalled that Callaghan
“would take us to lunch to meet members of Parliament.”

BCCI did not limit itself to Callaghan’s Labour party. Two Conser¬
vative members of Parliament became paid advisers to the bank, Sir
Julian Ridsdale and Julian Amery. (Ridsdale’s home in London hap¬
pens to be next door to a house owned by Zayed.) A former Tory MP,
Sir Frederic Bennett, served as an honorary director of BCCI’s Hong
Kong subsidiary until 1986 for $10,000 a year.

BCCI even managed to get close to the Conservative prime minister,
Margaret Thatcher (now Lady Thatcher), through one of its clients,
Nazmu Virani. One of the thousands of ethnic Asians who had settled
in Britain after they were expelled from Uganda by Idi Amin, Virani
eventually created a major property and leisure group called Control
Securities. He was reputedly one of the richest people in Britain and
was honored by his community in 1990 as Asian of the Year.

Virani’s Horatio Alger story appealed to Thatcher, for it seemed
proof of what was possible in the capitalistic system. “Mrs. Thatcher,”
said a former BCCI official, “had a weak spot for this Virani.” The
admiration was reciprocated, and Virani became a big supporter of the
Conservative party, meeting frequently with Thatcher and the party
secretary, Norman Tebbitt. Through Virani, several BCCI people met
Thatcher. She may not have realized that Virani was not quite the
self-made man he appeared to be. His company’s growth was based in
large part on millions of pounds of BCCI loans. This, of course, raises
an obvious question: To what extent were BCCI’s loans to Virani
aimed at buying political access and influence?

Another man in Thatcher’s circle who benefited from BCCI’s gener¬
osity was Brian Griffiths (now Lord Griffiths), a professor at London’s
City University and a senior adviser to the prime minister. After Grif¬
fiths set up a think tank in 1985, BCCI provided some of the funding.

FALSE PROFITS

88 )

The world of think tanks and foundations was intriguing to Abedi.
Like many American tycoons, he understood that they can be effective
tools for acquiring influence. The Rockefellers, for example, have
financed a series of public policy groups, including the Council on
Foreign Relations and the Trilateral Commission. Similarly, Abedi set
up his own organization, the Third World Foundation, which became
a sophisticated instrument for winning friends and influencing people.

The brains behind it was a veteran Pakistani bureaucrat named
Altaf Gauhar, who had a highly unorthodox background for the head
of a supposedly philanthropic entity. Gauhar served as information
secretary for President Mohammad Ayub Khan, Pakistan’s dictator
from 1958 to 1969. The bible of the regime, Ayub Khan’s Frietids, Not
Masters: A Political Autobiography, is believed to have been ghost¬
written by Gauhar. He was also involved in nationalizing various
newspapers as part of the regime’s efforts to stamp out freedom of the
press, earning him the nickname Goebbels.

When Zulfikar Ali Bhutto came to power in the early 1970s, Gauhar
was jailed. A few years later, he moved to England and was introduced
to Abedi, and the two men became close. In March 1978 they
launched the Third World Foundation; the three trustees were Abedi,
Gauhar, and Abedi’s deputy, Swaleh Naqvi. When the foundation
applied for registration as a charity in Britain, its stated goal was “to
relieve poverty and sickness and advance education among inhabitants
of the Third World Countries.” Despite these lofty words, it appears
that the main beneficiaries were Abedi, BCCI, and members of the
Gauhar family. Gauhar and two of his children wound up on the
payroll of the foundation or related entities.

BCCI’s support made it easy for Abedi to rub shoulders with people
of international stature. At one foundation event — a gala dinner
party in London — the guests included Lord Callaghan, Jamaica’s
Prime Minister Michael Manley, and Sir S. S. (“Sonny”) Ramphal, the
secretary-general of the Commonwealth. Callaghan became a trustee
of the foundation.

Gauhar realized that the easiest way to attract attention to the
foundation was through a prize — a kind of BCCI version of the Nobel
Prize. For maximum impact, the amount would be high; Abedi agreed
on $100,000, making it one of the largest prizes in the world at that
time. In 1979, BCCI endowed the prize with $10 million. Ramphal
was a member of the selection committee.

Prizewinners included Willy Brandt, the former West German chan¬
cellor, former president Julius Nyerere of Tanzania, the International

Friends in High Places ( 89

Rice Research Institute of Manila, and Nelson and Winnie Mandela.
Another recipient was Bob Geldof, the Irish rock musician who raised
money for the relief of world hunger. Kurt Waldheim, the secretary-
general of the United Nations from 1972 to 1981, was the guest of
honor at the 1981 presentation. A photograph shows him chatting
with Abedi.

Waldheim’s successor, Javier Perez de Cuellar, reportedly used
BCCI’s jet over a period of five years. A U.N. spokesman denied the
report but acknowledged that Perez de Cuellar had taken two trips on
planes owned by Pharaon. There were other BCCI ties to the United
Nations. When the Third World Prize was presented to Brandt, the
foundation was allowed to use the U.N.’s Trusteeship Council Cham¬
ber for the ceremony.

Through a curious coincidence, the prize was often presented by
leaders of countries where BCCI did significant business — or was
seeking permission to expand. Colombia’s President Belasario Betan-
cur was the presenter in 1984 at a BCCI-sponsored conference in
Colombia. In connection with the conference, Gauhar produced an
impressive-looking book on regional cooperation in Latin America.
The year before, Betancur’s government had permitted BCCI to ac¬
quire a Colombian bank.

Abedi waged a long campaign for permission to open a branch in
India, the country of his birth. But the Indian authorities resisted,
partly because they were suspicious of a bank run by men from Paki¬
stan — a country that has long been at odds with India. Abedi even
made a personal appeal to Prime Minister Indira Gandhi, according to
a source, who says that “she flatly refused him. She made a number of
remarks to him about what they [BCCI] were doing in Pakistan. She
had some kind of a dossier on him. And she said — basically — given
what you are doing in Pakistan, we don’t think [a BCCI branch] would
be in India’s national interest.” In 1983, however, the government
relented, permitting BCCI to open a branch in Bombay. The year
before, the Third World Prize had been presented by Indira Gandhi; a
close relative of hers was on the committee that chose Tanzania’s
Nyerere as the winner.

As Abedi built his political power base and his network, he did not
ignore the news media. He understood that journalists were a poten¬
tial threat to BCCI and he went to great lengths to influence their
coverage of the bank.

One way BCCI fended off criticism was by blaming it on prejudice.

FALSE PROFITS

90 )

Back in 1981, for example, during an interview for an article on
foreign banks in London, a BCCI spokesman was asked why his bank
had a dubious image. He adopted a somewhat conspiratorial tone and
said he would explain, but only if he would not be quoted by name. He
then confided that BCCI’s poor image was based on jealousy of BCCI’s
success and racism in the City of London. This tactic could be quite
effective with Third World audiences. In Muslim countries, in particu¬
lar, BCCI officials blamed the bank’s outsider status on anti-Muslim
prejudice in the West — particularly on the part of “the Zionist
lobby.” For the most part, though, the Third World media were not a
problem, since freedom of expression is severely limited in most devel¬
oping countries.

In the industrial countries, a favorite BCCI technique was to lie.
That was what some BCCI officials did in early 1978, when it was
revealed that clients of the bank, assisted by Bert Lance, had bought
stock in First American.

In Britain, the bank took advantage of libel laws that are extraordi¬
narily favorable to plaintiffs. One target was the New Statesman, a
left-leaning British weekly, which published a series on BCCI in late
1981. It was written by Tariq Ali, a prominent left-wing British intel¬
lectual of Pakistani origin. This was the first major expose of BCCI,
and it was filled with serious allegations. Ali wrote that a BCCI man¬
ager who had stolen depositors’ funds to maintain his gambling habit
was given £300,000 in severance pay. He also questioned the bank’s
accounting practices, raising doubts about the reliability of its
financial statements. More disturbing were charges that Abedi and his
bank were heavily involved in corruption and influence peddling,
using their power to “buy governments.” BCCI’s “dramatic rise may
be due as much to the political wheeler-dealing of its founder, Agha
Hasan Abedi, as to any intrinsic commercial skills,” Ali contended.
One shocking story concerned a former BCCI banker named Masood
Asghar, who worked in the Cayman Islands before resigning in 1978.
After threatening to sue the bank and write a book disclosing its
misconduct, Ali wrote, Asghar was beaten and raped by a group of
Pakistani soldiers.

BCCI sued the New Statesman for libel. After some legal fencing, the
publication — already tottering financially — settled out of court,
paying the bank “substantial damages” and printing a retraction and a
groveling apology. The settlement hastened the end of the New States¬
man as an independent publication; it was forced to merge with New

Friends in High Places ( 91

Society a few years later. BCCI, with its apology and retraction in
hand, continued to practice business as usual.

The Asghar incident is not the only report linking BCCI to violence
against a critic. A journalist who was attacked after probing into BCCI
was the late Anthony Mascarenhas of the Sunday Times of London.
According to a friend of his, Mascarenhas began looking into BCCI in
the early 1980s and “said that the bank was totally bent [and that]
they were laundering money.” The journalist said he had been warned
to stay away from the subject, but he persisted anyway. One night in
London, he was attacked by thugs and injured so severely that he had
to be hospitalized. “He suffered a broken jaw and a burst eardrum,”
said his friend. “He was knifed several times.” Mascarenhas was
certain that BCCI was behind the attack. While he was in the hospital,
his file on BCCI disappeared from the newspaper’s office.

There were, of course, limits to Abedi’s ability to intimidate and
influence the press, so the banker decided to play a more direct role in
the media business. The man behind this venture was Gauhar, the
former Pakistani bureaucrat who ran the Third World Foundation.

In the late 1970s, Gauhar approached the Guardian, one of Britain’s
leading newspapers, offering to prepare a special supplement on the
Third World, to run in the paper on a regular basis. The Guardian
agreed, and Gauhar became the co-editor of a monthly supplement
called the Guardian Third World Review , which began appearing in
1978. On at least one occasion, Gauhar used this forum on behalf of
the Zia regime. When the death sentence imposed on Bhutto provoked
an international uproar, Gauhar published an article attacking him in
the Guardian in early 1979. Not long after that, Bhutto was hanged.

Gauhar soon tapped into BCCI to start a series of publications.
“Gauhar had the ideas and Abedi wrote the checks,” says a former
associate of Gauhar’s. The Third World Quarterly was the house
organ of the Third World Foundation. Gauhar modeled it after For¬
eign Affairs, the official organ of the Council on Foreign Relations, the
prestigious public policy group in New York. In 1980, Gauhar
launched South, a monthly news magazine on developing countries.
South was conceived as a Third World version of the news magazines
published in industrial countries. “Mr. Abedi always felt that the Third
World should have its own magazine to compete with the Economist ,
Newsweek , and Time” says a former BCCI official.

South acquired a loyal following but it never succeeded commer¬
cially. In fact, a former associate of Gauhar’s estimates that the venture

FALSE PROFITS

92- )

cost BCCI more than $50 million between 1978 and 1990, when it
collapsed. It was, however, quite profitable for the Gauhar family.
Impressive titles and salaries were awarded to Altaf Gauhar, his son
Humayun, and his daughter Raana. BCCI used the publications to
make connections.

South was not a pure propaganda vehicle for BCCI; the relationship
was more complex. The staff included some respected journalists, and
the magazine sometimes published stories that seem contrary to
BCCFs interests. But the hidden hand of BCCI was always in the
background. Government leaders who could help the bank were fre¬
quently the subjects of flattering profiles. The magazine seldom pub¬
lished negative stories about countries where BCCI had important
interests.

South's first editor was the late Denzil Peiris, a highly regarded
journalist recruited from the Far Eastern Economic Review. “He be¬
came increasingly frustrated,” says a former colleague from the Re-
view, Lawrence Lifschultz. “There was one incident in particular. The
prepublication issue [distributed in mid-1980] contained an article
attacking military dictators.” It was by a Pakistani exile named Khalid
Hasan who was then working for South. Although the article did not
mention the general by name, Lifschultz notes that “it appeared just as
Zia had embarked on public hangings of alleged criminals who had
been convicted by summary martial law tribunals” and that it was
illustrated with a cartoon depicting men hanging from the bemedaled
chest of a military officer. “Denzil told me that Abedi saw it and had
the entire issue of South destroyed,” he continues. “Denzil was ex¬
tremely embarrassed.” After that incident, Hasan was forced out of
the magazine.

Over the years, South's coverage of the Zia regime was generally
quite positive. Such subjects as human rights abuses, corruption, and
government officials’ ties to heroin traffickers were seldom mentioned.
The magazine did publish an editorial criticizing Zia in February 1987
(nearly a decade after he seized power), but that was an exception.
More typical is a “South Survey” on Pakistan in February 1988. The
tone is captured by the lead sentence: “Today, 10 years after General
Mohammad Zia ul Haq came to power, life in Pakistan has undeniably
improved.” The survey contained advertisements from several state-
owned companies, including Pakistan International Airlines, United
Bank, and Habib Bank. This attitude changed abruptly in the October
1988 issue when the publisher, Humayun Gauhar, wrote that Zia

Friends in High Places ( 93

“consistently thwarted the democratic process with lies and deception
to perpetuate his rule.” By that time, of course, Zia was dead.

Sometimes BCCI’s influence was easy to detect. An interview with
Clark Clifford in November 1983 contained no reference to his role as
a lawyer for the bank. In 1988, after BCCI was charged with criminal
offenses in the United States, South did not find the story newswor¬
thy — although it was covered by just about every major news organi¬
zation in the world.

Several sources say that Gauhar helped BCCI expand its network by
putting South at the service of the bank. A Pakistani journalist ex¬
plained how the process worked. “Before Abedi moves anywhere he
sends in Gauhar. Before they move into any country Gauhar interviews
the president. The president becomes a cover story. This has repeatedly
happened. Then following that the bank moves in through the con¬
tacts that Gauhar has established.” One Third World official who was
courted with Gauhar’s help was Robert Mugabe, the first leader of
independent Zimbabwe.

When Zimbabwe became independent in April 1980, it was one of the
most economically advanced countries in black Africa, making it enor¬
mously attractive to foreign banks. “Everybody was trying to get in,”
recalled an official at a major U.S. bank. As things turned out, Mugabe
permitted only one new bank to enter Zimbabwe. In November of that
year, it was announced that the government had signed an agreement
with BCCI to establish a joint venture bank, owned in part by the
government: Bank of Credit and Commerce (Zimbabwe).

How is it possible that BCCI was the only foreign bank permitted
in this market? Part of the answer, according to BCCI sources, is
that Abedi had been cultivating Mugabe long before independence.
What is more, Abedi hedged his bets by making connections with
Mugabe’s principal rivals. That way, BCCI would have a leg up on
competing banks no matter who wound up as leader of the country.
Some of the politicians may have received cash from the bank. Abdur
Sakhia, a former BCCI executive, remembered driving one of his col¬
leagues to a hotel in London where several Zimbabwean politicians
were staying during independence negotiations. Sakhia’s colleague
“went with a briefcase and he came back without a briefcase, and I
asked him, ‘What happened to your briefcase?’ And he smiled at me
and he said, ‘This was for those people.’ I said, ‘What did you carry —
gold bars?’ He said, ‘No, some cash.’ ” After Mugabe was elected, said

FALSE PROFITS

94 )

another source, a BCCI officer named Iqbal Rizvi flew to Zimbabwe
and visited the new leader, who told him, “‘Of course, the bank is
yours.”’

After the election, BCCI continued to nurture the relationship. Mu¬
gabe was the subject of favorable articles in South that year. The
prepublication issue distributed in mid-1980 had Mugabe’s picture on
the cover and a flattering article inside. The magazine’s first issue,
published in October, contained an interview with Mugabe. Around
the same time, South discussed the possibility of publishing a news¬
paper for Mugabe’s political party. South later ran a flattering profile
of Zimbabwe’s finance minister, Bernard Chidzero, a respected figure
who has been a candidate for U.N. secretary-general. He became a
member of the advisory board of the Third World Quarterly .

Abedi also drew on General Zia’s help, arranging for the dictator to
provide military assistance to the Mugabe regime, according to a
former BCCI official. During a visit to Zimbabwe after the election,
Iqbal Rizvi asked Mugabe what the bank could do for him. Mugabe
said he wanted to fire the white Rhodesians who were running the
country’s armed forces and replace them with blacks, but there was a
dearth of qualified blacks to take over the air force. BCCI immediately
arranged for General Zia to send the number-two man in the Pakistani
Air Force, Daud Pota, to help set up a black-led air force.

This instance is just one of many occasions when Zia used his clout
to help BCCI. One BCCI banker has pointed out that most major
international banks could rely on the assistance of their home govern¬
ments in their efforts to expand abroad. BCCI, however, was literally a
bank without a country. Its three most important bases were in Lux¬
embourg, the Cayman Islands, and Britain, but it was not really a local
bank in any of these countries. Pakistan often filled the role of a home
country when Abedi needed political backing to enter new markets.
Zia was particularly helpful in China.

When China began opening its economy to foreign businesses in the
1970s, international banks clamored for permission to establish of¬
fices there. Bankers naturally assumed that China would give prefer¬
ence to the top international banks from countries with which it had
the strongest trading links —Japan, Britain, Hong Kong, the United
States, and so on. In 1985, the Chinese government announced that
certain foreign banks would be permitted to open offices in Shenzhen,
a special economic zone bordering Hong Kong, and the first institution
so privileged was the Hongkong and Shanghai Banking Corporation, a

Friends in High Places ( 95

choice that surprised no one. Bankers were stunned, however, to learn
that the second bank allowed in was BCCI.

What its rivals did not know was that Abedi had invested a tremen¬
dous amount of effort in cultivating the Chinese, drawing on the
resources of BCCI and its most powerful allies. Abedi had taken
advantage of Pakistan’s special relationship with China by asking
Zia to lobby government officials on BCCI’s behalf. Abedi was also
assisted by Pakistan’s former ambassador to Peking, Sultan Moham¬
mad Khan, a paid adviser to BCCI. Altaf Gauhar did his part as
well. In 1983, the Third World Foundation invited China’s Prime Min¬
ister Zhao Ziyang to present the Third World Prize. The ceremony
was cosponsored by the Chinese Academy of Social Sciences. Two
years later, South published an extremely optimistic “survey” on
China, headlined “New Directions for Progress.” Like the Pakistan
survey, it was filled with advertisements from government-owned enti¬
ties. There was even talk of launching a Chinese-language edition of
South .

Abedi and Jimmy Carter arrived in China on June 18, 1987, two
days before the start of a Third World Advertising Congress in Peking,
organized by South magazine in partnership with a government agen¬
cy called the China National Advertising Association for Foreign Eco¬
nomic Relations and Trade. It was a grandiose event, attended by
1,000 foreigners and 530 Chinese delegates and lasting nearly two
weeks. Gauhar’s son Humayun invited several members of his family,
according to one attendee. “All his relatives were there.”

“The main thing everyone was shocked about was that they secured
the Great Hall of the People,” says a source familiar with the event. “It
would be like the U.S. Capitol being handed over for an advertising
conference.” He adds that “there were lavish receptions, lavish fashion
shows. Of course, it was just one of the ways BCCI roped in Chinese
bureaucrats as part of their entry into China.”

It was later estimated that South magazine lost $2 million on the
conference.

Political friends around the world helped Abedi expand the BCCI
network. When, for example, BCCI wanted to buy an ailing bank that
had been taken over by the Spanish government, it was represented by
a former finance minister, Juan Antonio Garcia Diez, in its negotia¬
tions. After the takeover was completed in 1983, Garcia Diez wound
up on the board of the Spanish bank.

FALSE PROFITS

96 )

Andrew Young earned his BCCI consulting fees by introducing
Abedi to business and government officials in more than a dozen
developing countries, including Nicaragua, Guatemala, Zambia, and
Tanzania. Such connections not only enabled BCCI to expand its
network but helped it to gather deposits from Third World central
banks.

BCCI’s highly placed u door openers” were not always successful.
One embarrassing setback occurred in Singapore, one of the world’s
leading international banking centers. Over the years, BCCI applied
repeatedly for permission to open a branch in Singapore. Abedi flew
there in August 1979 and made a personal pitch for a license, but the
man who spearheaded the effort was BCCI’s board member J. D. van
Oenen, someone the Singaporeans would not have wanted to offend.
When he worked in Singapore for Bank of America, van Oenen had
helped to launch the country as a banking center. But even he was
rebuffed. Abedi then enlisted the help of one of his most prominent
political allies, Lord Callaghan. In 1985, he flew to Singapore and
lobbied Prime Minister Lee Kuan Yew. Lee turned him down.

Years later, officials of the Monetary Authority of Singapore said
that they conducted a thorough investigation of BCCI in the early
1980s and concluded that it was a poorly regulated institution. They
were also disturbed by such factors as BCCI’s changes of outside
auditors and its ties to Bert Lance. Tiny Singapore did something that
the United States, Great Britain, France, Japan, and other major coun¬
tries had failed to do. It said no to BCCI.

BCCI officials all over the world knew they would be judged not only
as bankers but on the basis of their ability to get close to powerful
people. One man who excelled at this was Abdur Sakhia, the manager
of BCCI’s Miami branch, then its senior official in the United States,
based in New York. Florida was a very important market to BCCI,
with four branches and the regional headquarters for Latin America
and the Caribbean. When the headquarters opened in 1981, Sakhia
threw a lavish party in the penthouse of Miami’s Interterra Building.
Lots of celebrities attended, including Andrew Young, John E. (“Jeb”)
Bush, a son of George Bush’s, and Bob Graham, the Democratic
governor and now senator. As he left the party, Graham said, “These
banks are making a statement about South Florida. They are attracted
here because of our growth, our ebullience, our confidence in the
future.”

Friends in Fiigh Places ( 97

The presence of Graham and the other political figures is not at all
surprising in light of what is now known about Sakhia’s penchant for
collecting prominent people. Aziz Rehman, a Pakistani immigrant
who was a chauffeur in the Miami office from 1982 to February 1984,
has testified that Sakhia spent much of his time glad-handing govern¬
ment officials and other VIPs. In his less than perfect English, Rehman
said, “When I saw Mr. Sakhia with manager of BCCI, he was more
involved to get influence or get involved with this senator or politicians
instead of banking.”

Outside Miami, one of BCCI’s biggest U.S. offices was in Wash¬
ington, D.C., which was odd because the city is not an international
banking center. Only a few foreign banks have opened representative
offices in Washington, and they are typically staffed by a handful of
people — one or two bankers and a few clerical employees. BCCEs
representative office was unique. It occupied a large suite at the corner
of 16th and K streets in Northwest Washington, which had been leased
with the assistance of Clark Clifford’s law firm. The office manager,
Cathy Pyle, had spent several years as an employee of the law firm.
About two dozen people worked there, including bankers, consul¬
tants, secretaries, and chauffeurs. The office even boasted four limou¬
sines: three Mercedes-Benzes and a Cadillac. In its five-year existence,
the office spent more than $20 million. Many of the employees had
nothing to do with conventional banking activities. Some of them
attended to the needs of visiting dignitaries, especially those from the
UAE and Saudi Arabia. One man who headed the office, Sani Ahmed,
had run BCCI’s protocol office in Pakistan; in that post, he attended to
the personal needs of visiting sheikhs.

Drag Avramovic, a respected Yugoslav economist, put out a month¬
ly newsletter for the Washington office on development issues while
working on a scheme of Abedi’s to launch a Third World bank in
Washington. Abedi managed to attract several political backers for the
project, but it never really had a chance. There was already such an
entity in Washington, the International Bank for Reconstruction and
Development, better known as the World Bank.

BCCI, incidentally, had a startling number of connections to the
World Bank. Many of them were indirect, but together they show the
extent of BCCI’s reach. The British financier I. P. M. (“Peter”) Cargill,
who had been a senior official of the World Bank, served for a time on
BCCEs main board of directors. Moeen Qureshi, a Pakistani bureau¬
crat who was effectively the second most important official at the

FALSE PROFITS

98 )

World Bank from 1988 to 1991, had close ties to BCCI. In the late
1980s, Abedi considered putting him in charge of First American
Bankshares. In 1991, his brother applied for a banking license with
BCCI in Pakistan. * Shahid Husain, the head of the World Bank’s Latin
American operation, also had close connections with Abedi and his
crowd and discussed going to work for BCCI with bank officials.
Avramovic, who worked on the Third World bank scheme, had served
as an economist at the World Bank before joining BCCI in Washing¬
ton. He customarily lunched at the World Bank even when he worked
for BCCI. A. W. (“Tom”) Clausen, the president of the World Bank
from 1981 to 1987, had been the president of Bank of America, one of
BCCI’s first and largest shareholders. Clausen later returned to B of A
for a second term as president.

The heavily staffed Washington office suggests that whoever ran it
must have been Abedi’s chief envoy to the U.S. political establishment.
That was not the case. Abedi’s number-one representative in Washing¬
ton was Clark Clifford, superlawyer, eminence grise of the Democratic
party, and preeminent power broker.

One obvious sign of Clifford’s stature is that he played several import¬
ant roles during Jimmy Carter’s presidency. While advising Carter and
acting as a presidential envoy, Clifford represented Bert Lance, the
target of a criminal investigation by Carter’s own Justice Department.
Although Clifford might claim that there was nothing improper about
it, more cynical observers might say it exemplifies much of what is
wrong with Washington: he was part of the city’s “permanent govern¬
ment” of fixers and lobbyists who wield power behind the scenes while
elected officials come and go.

But Clifford’s power was beginning to ebb as the years passed.
When Abedi retained the lawyer in 1978, he was seventy-one years old
and many of his contemporaries had retired or died. But he was not
ready to retire, to sit around and “wait to die,” as he put it. The BCCI
connection was a major boost for Clifford, enabling him to, in effect,
relaunch his career. His law firm went 011 to earn millions of dollars in
legal fees from BCCI, its Arab clients, and First American Bankshares.
In 1988, it was estimated that nearly a third of Clifford & Warnke’s
twenty lawyers did some work for First American. Perhaps more

*In an interview in 1991, Qureshi sought to play down his links with BCCI and First
American, but did not deny them.

Friends in High Places ( 99

important, Clifford and Robert Altman ran First American, a major
force in the financial community.

One source of power is money, and Clifford and Altman earned
considerable goodwill by contributing to political campaigns. In addi¬
tion, Clifford enjoyed a close friendship with Pamela Harriman, who
also has contributed heavily to moderate Democrats. Along with her
late husband, the party elder statesman Averell Harriman, she had
formed a powerful political action committee, Democrats for the
Eighties. Clifford has called it “one of the Democratic Party’s most
successful efforts.” Through this association, Clifford also drew close
to the Harriman family trust and Brown Brothers, Harriman & Com¬
pany, an investment banking firm on Wall Street. Clifford and a Brown
Brothers partner, William Rich III, are partners with Mrs. Harriman in
Middleburg, an investment trust that manages Harriman money. Rich
served on the board of First American Bank of New York.

Before the takeover of First American, Altman was little known
outside Washington’s legal circles. He was Clifford’s acolyte, to be
sure, but had little stature of his own. After the takeover, his status
increased dramatically, since he was now involved in running First
American. One sign of Altman’s growing prominence was a lengthy —
and highly flattering — profile of him in the Washington Post in Octo¬
ber 1984. American Lawyer ran a feature on up-and-coming young
lawyers in March 1986; Altman was one of the examples. Clifford was
quoted as saying, “Twenty years from now I expect him not only to be
the leader of this firm but to be the leader of the bar in Washington.”

While Clifford concentrated on cultivating Democrats, Altman de¬
veloped friendships with members of both parties. His social success
owed much to his wife, the actress Lynda Carter. She was known for
her starring role in the 1970s television show Wonder Woman , based
on the comic book character. She later became a spokeswoman for
Maybelline cosmetics, whose parent company was a client of Alt¬
man’s. A company official introduced them, and they were married in
January 1984. The ceremony, held in the posh Pacific Palisades section
of Los Angeles, was a glittering affair. Clifford was the best man and
the guests included Washington power brokers as well as such Holly¬
wood celebrities as Loni Anderson, Ed McMahon, and Valerie Harper.
Abedi attended the wedding, and he gave the bride an unforgettable
present, a Jaguar XYS sports car. “He said I could have any one I
wanted,” she later recalled. “Well, I picked a black Jag, but he would
have given me a Mercedes, a Ferrari, anything.” In Hollywood, Lynda

IOO )

FALSE PROFITS

Carter had never been more than a grade B television actress. In
Washington, a city full of drab bureaucrats, she represented style and
glamour, and the Altmans became prominent socialites. Their mansion
in suburban Potomac, Maryland — purchased for $2 .6 million in
1987 — was the site of many opulent parties attended by the cream of
official Washington.

Lynda Carter has been nothing less than a magnet for several senior
Republicans. Senator Orrin Hatch of Utah displays a picture of him¬
self with the actress in his office and frequently refers to her husband as
“my good friend.” The Altmans’ social circle also includes a large
number of people close to George Bush.

Abedi’s political friends not only enabled him to expand the BCCI
network, they were useful in defending the bank from external threats.
When, for example, BCCI was accused of criminal offenses in the
United States in the late 1980s, such allies as Jimmy Carter and Lord
Callaghan came to the bank’s defense.

BCCI’s connections were also useful as tools for advancing the
foreign policy agendas of Abedi’s patrons in the Middle East and other
parts of the world. Pakistan’s General Zia used Abedi to cement his
relationships with rich Arab oil states and the United States — which
together channeled billions of dollars in aid to Islamabad. For the
Americans, BCCI became an important contact point between the
United States government and Third World leaders. With his courtier
origins, Abedi relished this role. A family friend told one investigator
of the bank that Abedi “wanted to be bigger than the bank, he wanted
to control countries and heads of state, obliging them with jobs for
relations, balance of payments help, gifts.”

Abedi’s willingness to act as a foreign policy instrument was appar¬
ent early on. In 1977, as we have seen, he allegedly channeled millions
of dollars to the political party of Pakistan’s Bhutto; the money is
believed to have come from Sheikh Zayed. Zayed and the rulers of
neighboring Saudi Arabia viewed Pakistan as an important ally and
worked hard to develop close ties with Bhutto and his successor,
General Zia. Pakistan is near the Persian Gulf, is sympathetic to the
conservative Arab countries, and is politically aligned with the West.
What is more, Pakistanis are for the most part Sunni Muslims, the
dominant branch of Islam in Saudi Arabia.

Thousands of Pakistanis, of course, worked in the thinly populated
sheikhdoms of the Gulf as laborers and clerks. They also provided

Friends in High Places ( ioi

military muscle. General Zia became virtually a mercenary for wealthy
Arab countries, providing troops in exchange for oil money. Zia, noted
the Far Eastern Economic Review, “courted . . . petrodollars by de¬
claring he and his soldiers would defend the Saudi royal family with
their lives and sent a large number of soldiers to serve in Saudi Ara¬
bia.” For several years, two regiments of Pakistani troops have been
billeted in Saudi Arabia. Abedi is believed to have played a role in
fostering military ties between Pakistan and the Arab states. “We had
twenty thousand troops in Saudi Arabia in the late seventies,” says a
Pakistani journalist. “That deal is supposed to have been brokered by
BCCI.”

One threat to the conservative Arab monarchies is terrorism. It is
not only Israelis and Westerners who are vulnerable to attacks from
Palestinian terrorist groups, it is also officials of the conservative oil-
producing states of the Gulf. In 1975, for example, the infamous
Venezuelan terrorist “Carlos,” with other members of the Popular
Front for the Liberation of Palestine, kidnapped eleven oil ministers in
Vienna, including Saudi Arabia’s Ahmed Zaki Yamani and six other
Arab ministers.

Since then, there have been few such attacks — partly because ter¬
rorist groups have extorted millions of dollars from Arab officials in a
Mafia-style protection racket. One of those who agreed to pay up was
Sheikh Zayed, and he used BCCI to deliver the funds. In 1984, Zayed
paid $17 million to Abu Nidal, the notorious Palestinian terrorist
whose nom de guerre means “father of destruction” in Arabic. Some
of the money was deposited in BCCI bank accounts in London con¬
trolled by the Abu Nidal organization.

Abedi was ideally placed to help Zayed and the rulers of Saudi
Arabia acquire political influence in the United States. BCCI and its
satellites were, after all, owned by some of the most prominent people
in the Arab world, and the bank had connections with powerful people
in the United States.

Saudi Arabia’s efforts to acquire American support date from World
War II, when the United States was beginning to displace Great Britain
as the dominant Western power in the region.

Colonel William Eddy, who took over as America’s permanent repre¬
sentative in Saudi Arabia in late 1944, had the wind in his sails. The
son of a Presbyterian missionary, he had grown up in Lebanon and
traveled widely in the Middle East. He had the experience and Arabic

102 ) FALSE PROFITS

language skills to capitalize on America's growing influence in the
region.

When Washington upgraded its outpost in Jiddah, Eddy won the job
of minister. The young colonel rode roughshod over his sniffy British
rivals when it came to securing influence in Saudi Arabia. One advan¬
tage he enjoyed was that Washington could afford to provide substan¬
tial financial support to the Saudis. In 1943, President Franklin D.
Roosevelt had authorized Lend-Lease aid to the Saudis, declaring that
“the defense of Saudi Arabia is vital to the defense of the United
States.” Over the next two years, the Saudis received $99 million
through the program.

In January 1945, Eddy took on the most important assignment of
his diplomatic career. On orders from Washington, he secretly ar¬
ranged for President Roosevelt to meet with King Abdel-Aziz Ibn Saud
of Saudi Arabia, the founder of the desert kingdom. It was a milestone
for both countries, the start of a relationship that would lead to the
world’s most powerful democracy allying itself closely with an abso¬
lute and intolerant theocracy.

After meeting in Yalta with Churchill and Stalin, Roosevelt sailed to
Egypt for five hours of talks with the Saudi monarch. The U.S. Navy
cruiser Quincy moored on the Great Bitter Lake off the Suez Canal.
For Abdel-Aziz, this would be his first meeting with an “infidel” leader.
The USS Murphy ferried the king to his rendezvous; there was some
difficulty because he wanted to take a hundred live sheep aboard the
vessel — they were essential to maintaining a correct and religious
diet. The king insisted on sleeping on deck, ignoring the luxurious
cabin that had been prepared for him.

The meeting centered on the issues that are basic to the bilateral
relationship to this day: oil, defense, money, and Arab-Jewish disagree¬
ments. Roosevelt and Abdel-Aziz affirmed America’s dominant role in
developing Saudi Arabia’s oil reserves and in providing for its defense.
The U.S. Navy had already become one of Saudi Arabia’s best custom¬
ers for oil in these closing months of World War II. America had also
made a commitment to match Britain’s financial aid, and soon sur¬
passed it. As the Americans distributed largesse, the British were des¬
perately trying to persuade Abdel-Aziz to rein in his spending habits.
Such a stingy approach from the imperialist British — who were al¬
ready blamed by Abdel-Aziz and other Arabs for Jewish immigration
into Palestine — hastened the decline in Britain’s influence.

Not that Roosevelt and Abdel-Aziz found it easy to agree about
Palestine and the aspirations of the Jews and Arabs who lived in that

Friends in High Places ( 103

British-administered territory. Roosevelt, eager to please the king, as¬
sured him that there would be no change in U.S. policy on the issue of
Palestine without first having full consultations with both the Arab
and Jewish sides. The president also promised to undertake no action
that might be hostile to the Arab people. Abdel-Aziz strongly argued
for giving the Jews “and their descendants the choicest lands and
homes of the Germans who oppressed them.” Roosevelt answered that
the Jews had a dread of remaining in Germany as well as a “sentimen¬
tal desire” to settle in Palestine.

Roosevelt was apparently impressed by the Saudi king. On his re¬
turn to Washington, he told Congress, “Of the problems of Arabia, I
learned more about the whole problem, the Muslim problem, the
Jewish problem, by talking with King Ibn Saud* for five minutes than
I could have learned in the exchange of two or three dozen letters.”

The Arabs placed great faith in the promises the U.S. president made
concerning Palestine. But his words were to have little effect. In Ap¬
ril — within weeks of his meeting with Abdel-Aziz and days after
setting out his pledges in a letter to the king — Roosevelt was dead. His
successor, Harry Truman, decided not to hold to the understandings
reached at the Great Bitter Lake. He told his advisers: “I’m sorry
gentlemen, but I have to answer to hundreds of thousands who are
anxious for the success of Zionism; I do not have hundreds of thou¬
sands of Arabs among my constituents.” Truman recognized the new
state of Israel in 1948, a move that had been urged on him by key
advisers, who stressed the importance of the Jewish vote in the tough
presidential election of that year.

Three decades later, Abdel-Aziz’s son Fahd — as crown prince of
Saudi Arabia — received quite different treatment from another Amer¬
ican president, Jimmy Carter. Visiting Washington in May 1977, Fahd
was received with great fanfare as a leader of a major American ally.
One sure sign of the kingdom’s new status was an administration
proposal to sell F-15 Eagles to Saudi Arabia. Manufactured by Mc¬
Donnell Douglas, they were the world’s most advanced fighter planes.
One year later, the Senate approved the sale, 54-44.

In 1981, the Saudis achieved another important victory. The Reagan
administration proposed selling AWACS (airborne warning and con¬
trol systems) — advanced radar planes — to the kingdom. This was a
technology that had not been supplied to Israel and that threatened to

*In the West, the Saudi king was often called Ibn Saud.

FALSE PROFITS

IO4 )

alter the balance of power in the Middle East. On October 28, 1981,
the Senate approved the AWACS deal, 52-48.

Before the Senate vote, Prince Bandar bin Sultan, a son of Saudi
Arabia’s defense minister and a future ambassador to Washington, had
made much of the historic ties between Washington and Riyadh. As he
drummed up support in Washington for the AWACS sale, he carried
around a photograph of his grandfather, King Abdel-Aziz, meeting
with President Roosevelt in 1945* This, Bandar would say, was evi¬
dence of the importance, history, and continuity of the U.S.-Saudi
relationship.

Despite his efforts to invoke the past, a great deal had changed since
1945. Washington no longer viewed Saudi Arabia as a quaint backwa¬
ter but as the world’s leading oil exporter and an important ally in the
Middle East. The al-Saud family shared Washington’s desire to curb
the growth of Soviet power and Arab radicalism in the region. Perhaps
just as important was that the Saudis had learned how to manipulate
the American political process to advance their own interests and to
counteract the influence of the pro-Israel lobby.

Before the Senate’s vote on the AWACS deal, the Saudis carried out a
massive lobbying campaign, coordinated by Prince Bandar. His com¬
mand post was a set of rooms on the sixth floor of Washington’s
Fairfax Hotel (now the Ritz-Carlton). As part of the the campaign,
U.S. corporations that did business in Saudi Arabia were urged to use
their political clout in Congress on behalf of the deal. The evening it
was approved by the Senate, the Saudis, their lobbyists, and their
political allies celebrated with a banquet at the Tunisian ambassador’s
house. The dinner was attended by congressmen, State Department
officials, Arab ambassadors, and many others who had lobbied hard
for the sale.

One man who should have been honored at the banquet was Agha
Hasan Abedi. Since the founding of BCCI, he had been a potent
weapon in the Arab arsenal, putting his contacts and the BCCI net¬
work at the service of his Middle Eastern patrons. For years, the Saudis
had spent an enormous amount of effort and money to acquire in¬
fluence in the United States, using such inducements as gifts, business
contracts, and — allegedly — political contributions. The campaign
was orchestrated and executed by an army of Saudi officials, lobbyists,
and surrogates, an extraordinary number of whom had ties to BCCI
and Abedi.

Friends in High Places ( 105

Adnan Khashoggi, the Saudi arms dealer, was one important surro¬
gate. His father was a physician and adviser to King Faisal, and his
own business career was based on his connections with other members
of the royal family, including Prince Sultan, the defense minister. For¬
eign arms manufacturers paid Khashoggi millions of dollars in com¬
missions on the understanding that he would channel some of the
money to friends in the regime.

Khashoggi targeted Richard Nixon as a potentially valuable con¬
tact in the late 1960s. The two men first met in 1967 at the Ritz Hotel
in Paris. At the time, Nixon was widely regarded as a political has-
been, but Khashoggi cultivated him, taking steps to ensure that
he would be received as a VIP during a visit to the Middle East;
Khashoggi even offered to finance the trip. He soon became close to
Nixon and to Nixon’s best friend, Bebe Rebozo. Arab newspapers
reported that Khashoggi also gave $1 million to Nixon’s campaign
coffers, but no proof was ever found. When questioned by the Waterg¬
ate prosecutors, Khashoggi admitted having contributed $50,000 to
the production of a phonograph record of Nixon’s speeches. As presi¬
dent, Nixon involved Khashoggi in Middle East diplomacy, asking him
to convey secret messages to King Faisal after the Yom Kippur War in
1973 -

Khashoggi was connected to the BCCI network in several different
ways. He was a friend of Kamal Adham’s as well as other members of
the royal family who owned stock in Abedi’s bank. When he was
implicated in the Lockheed bribery scandal of the mid-1970s, he hired
several U.S. lawyers to represent him. One of those was Clark Clifford,
according to press reports at the time. (Clifford has denied it.) Years
later, Khashoggi played an important role in the Iran-contra affair, and
he used BCCI’s facilities.

The political clout of Saudi Arabia, the UAE, and other oil-produc¬
ing states increased enormously after they learned to use oil as a
political weapon. It was BCCI’s patron — Sheikh Zayed — who was,
as noted earlier, the first Arab leader to declare an embargo against the
United States in 1973. Later that year, OPEC pushed oil prices to
dizzying heights, and Arab leaders used their new wealth to buy in¬
fluence in the West.

During Nixon’s presidency, Arab leaders showered valuable gifts on
top U.S. officials and their families. Prince Sultan gave a diamond
bracelet to Nixon’s wife and brooches to his daughters. King Faisal
gave Vice President Spiro T. Agnew a diamond-studded, gold-sheathed

FALSE PROFITS

IO6 )

dagger; his wife received diamond and pearl jewelry from Crown
Prince Jabir al-Ahmad al-Sabah of Kuwait. The emir of Kuwait gave
ruby and diamond jewelry to Adele Rogers, the wife of the secretary of
state. Under U.S. law, the recipients were allowed to keep only presents
worth $50 or less, but many of them pocketed the gifts. They turned
them in only after the Washington Post ran an expose in 1974 on how
Secretary of State William P. Rogers had failed to hand over valuable
gifts.

The presents were mere baubles compared with the rewards that
awaited many Nixonites when they left government service. A long list
of officials in the Nixon and Ford administrations wound up doing
business in the Middle East. Ford’s treasury secretary, William Simon,
went on to manage a huge pool of money for the Saudi investor
Suleiman Olayan. Gerald Parsky, who worked under Simon as an
assistant secretary, pushed for policies to encourage Arabs to invest in
the United States. He then joined the Gibson, Dunn &c Crutcher law
firm, which represented Sheikh Zayed’s interests in Washington.
George Shultz and Caspar Weinberger, who held several senior posts
in the Nixon administration, both joined Bechtel, a giant construction
firm that did billions of dollars’ worth of work in Saudi Arabia. Shultz
was president; Weinberger served as “special counsel.” When the Sau¬
dis were lobbying for approval of the AWACS deal in 1981, Wein¬
berger was secretary of defense. Shultz — still at Bechtel — wrote a
letter urging approval to every member of the Senate. The following
year, he became secretary of state.

Kamal Adham has had important connections in the U.S. govern¬
ment since at least the early 1960s, when he founded Saudi Arabia’s
intelligence agency with assistance from the CIA. In the 1970s, Adham
and several other Arab investors with ties to BCCI hooked up with
John B. Connally, the former governor of Texas and treasury secretary
in the Nixon administration. At the time, Connally was widely re¬
garded as a leading contender for the Republican nomination for
president. Unlike the other candidates, he was sympathetic to the Arab
point of view in the Arab-Israeli conflict. He was just the kind of
politician who would have appealed to Abedi’s backers.

Connally appears at least three times in deals by BCCI insiders. In
1975, First Arabian Corporation, an investment firm partly owned by
Adham and Pharaon, took over Detroit’s Bank of the Commonwealth.
(Pharaon later sold out.) Many law firms could have assisted the
investors, but they happened to choose Connally’s firm in Houston,

Friends in High Places ( 107

Vinson & Elkins. Later, Connally’s law partner Frank Van Court
became Pharaon’s chief representative in the United States. In Septem¬
ber 1977, Connally bought Main Bank, a small ($66 million in depos¬
its) institution in Houston, with Fredrick Erck, a Texas banker, and
two BCCI associates, Pharaon and Khalid Bin Mahfouz, the Saudi
banker. (In the mid-1980s, Bin Mahfouz became a BCCI board mem¬
ber as well as a major investor in both BCCI and First American.)

The third deal that has come to light concerns the silver market.
When the Texas tycoons Herbert and Bunker Hunt tried to corner the
world silver market in the late 1970s, they were acting with other
investors, including — it is alleged — Bin Mahfouz, Pharaon, and
leading members of the Saudi ruling family. Connally is said to have
introduced the Hunts to Bin Mahfouz and Pharaon. One of the banks
involved in financing the Hunts was closely associated with BCCI,
Banque Arabe et Internationale d’Investissement. This escapade al¬
most broke the Hunt family and badly dented the fortunes of the
Saudis involved.

At the time of the Main Bank sale, there were charges that “the
Arabs” were trying to buy influence with Connally, an allegation he
hotly denied. “So what’s the big deal? We bought a bank,” Connally
would say. “The big deal,” noted his biographer James Reston, Jr.,
“was the appearance it created for a potential candidate for the U.S.
presidency, when the United States was attempting to make itself more
independent of foreign oil, when the special relationship with Israel
was a cornerstone of American foreign policy, and when an Arab oil
embargo hung as a persistent threat to American society, which now
drew 55 percent of its petroleum from abroad.” The Texan now had
“a direct, personal, financial stake in a cozy relationship with the Arab
world,” Reston pointed out. Connally, of course, never made it to the
White House, and the BCCI crowd soon began to target Jimmy Carter.

Arab governments began trying to acquire influence with Carter even
before he won the Democratic nomination for president in 1976. One
of his closest aides, the pollster Patrick Caddell, was simultaneously
advising Carter and Saudi Arabia’s embassy in Washington. For
$80,000 a year, Caddell would presumably help the Saudis manipulate
the U.S. political establishment — which would soon be headed by
Carter.

After Carter became president, Abedi, of course, rescued Bert Lance
by arranging for Pharaon to buy Lance’s stock in National Bank of

FALSE PROFITS

108 )

Georgia — an indulgent lender to Carter’s family business. Finally, as
we shall see, Kamal Adham provided valuable support to Carter in the
Camp David peace process. BCCI’s involvement with Carter inten¬
sified after he left the White House. As noted earlier, the Carter Center
and Global 2000 received millions of dollars from BCCI and related
sources. Another major donor was King Fahd of Saudi Arabia, a
relative of such BCCI shareholders as Kamal Adham and Prince Turki.
Prince Bandar, a nephew of the king’s and the country’s ambassador to
Washington, attended the dedication of the Carter Center.

As president, Carter was generally supportive of Israel, although he
did take certain positions that antagonized the pro-Israel lobby, such
as the sale of F-15 fighters to Saudi Arabia in 1978. Another setback
for Israel occurred in April of that year, when the Palestine Liberation
Organization was allowed to open an office in Washington, D.C.

Carter doesn’t seem to be the sort of man who would become a
mouthpiece for foreign governments, but even the most honorable
person will listen sympathetically to the opinions of close friends. After
leaving office, he seemed to move closer to the point of view of Abedi
and his Arab patrons. Carter not only lobbied for the 1981 AWACS
deal, he pushed for another arms sale proposed by the Reagan admin¬
istration in 1986 — without having been asked to do so by the White
House. In 1983, he spoke movingly about the plight of Palestinians in
the Israeli-occupied West Bank but said nothing about human rights
abuses by Arab regimes. And in 1989, he sharply criticized Salman
Rushdie for offending Muslims in his novel The Satanic Verses. Al¬
though Carter disapproved of the “death sentence” imposed on Rush¬
die by Iran’s Ayatollah Khomeini, he called the book “a direct insult”
to “millions of Muslims.”

Was First American Bankshares part of the foreign policy apparatus of
Abedi’s backers? Clifford always maintained that the takeover of First
American was a straightforward business deal. In fact, there is consid¬
erable evidence that Abedi’s patrons regarded First American — and
Clifford — as political tools. One indication is that several people
involved in the takeover had ties to the Arab lobby in the United States.
Adham, the lead investor, was associated with two of Saudi Arabia’s
principal lobbyists in Washington.

At the Federal Reserve’s April 1981 hearing on the takeover, Adham
said he had learned about the availability of First American’s stock
from Hassan Yassin, whom he described as a friend at the Saudi

Friends in High Places ( 109

embassy. This version seemed unlikely, since Abedi was recommending
the stock to BCCI clients at the same time. Yet it is possible. In January
1978 — at the same time the BCCI clients were scooping up the
stock — a member of the Saudi royal family, Prince Nawaf bin Abdul
Aziz al-Saud, also bought 15,000 shares. His contract to buy the
shares was delivered through Yassin. And who was Yassin? He hap¬
pened to be one of Saudi Arabia’s chief lobbyists in Washington. He
was a registered foreign agent for the kingdom until December 1976,
when he joined the embassy as director of the Saudi Arabian Informa¬
tion Office.

The kingdom’s chief lobbyist in the United States was Frederick G.
Dutton, a Washington lawyer. In 1974, when he was angling to get the
Saudi contract, he made it clear in a letter to the Saudi government that
he wanted to report to Adham. He stipulated that he would “be guided
by and report to Sheikh Adham and shall not be assigned to work
regularly under a ministry or bureaucracy, nor under other Ameri¬
cans.” Before the Saudis awarded him the contract, Dutton went to
Saudi Arabia and met with both Adham and Prince Turki, Adham’s
nephew and deputy in Saudi intelligence as well as a BCCI stockholder.
Interestingly, Dutton was connected with another important character
in the First American deal: in 1966-67, he was a partner in Clark
Clifford’s law firm.

An even stronger indication that the First American takeover had
something to do with Arab foreign policy comes from Bert Lance, who
was, of course, Abedi’s key adviser in the deal. In early 1978, Lance
met with Abedi and Sheikh Zayed in Pakistan. (During this trip, Lance
spoke to Zayed through an interpreter.) Zayed talked about “his
concerns of the treatment that he was receiving from the U.S. govern¬
ment,” Lance later recalled. He added that Zayed felt “that he was
being treated in a manner that really wasn’t befitting the strategic
importance or the fiscal importance of the UAE.” The purchase of one
of the most important banking companies in Washington could cer¬
tainly help Zayed acquire the respect he craved.

While Zayed’s remarks merely imply that there were political mo¬
tives, a former Abu Dhabi official with intimate knowledge of the deal
has been much more explicit, stating that obtaining political influence
was the principal goal of the takeover : He said in a written account
that he and other people involved in the deal “talked about the fact
that having a Washington presence would mean that senators, con¬
gressmen, and other government servants would bank there and

no )

FALSE PROFITS

would require a range of financial service.” The statement continued:
“Knowing the BCCI style of personalized service” that had been “very
successful in other parts of the world at the higher government levels,
it naturally followed that over time, that we would gain influence.”

BCCI and its backers understood the power of the pro-Israel lobby
in Washington. “We were aware that the various anti-Arab lobbying
groups exercised their influence through money,” the former Abu
Dhabi official said. “What better way would there be than if our bank
became the creditor, lender, provider of funds to key U.S. government
personnel over time? We knew the prices of houses in Georgetown and
the mortgages.” He continued: “Because of our ownership in and
relationship at the top across the board, we were quite comfortable,
especially because we have power brokers like Clifford in place; any
influence that the ruler [Sheikh Zayed] needed to exercise in Wash¬
ington could be done through BCCPs control of Financial General,”
which would soon become First American.

Did the Arab investors indeed use First American and Clifford to
acquire influence in the United States?

Although Clifford bristles at terms like lobbyist, power broker, and
influence peddler, he has acted as a mouthpiece for foreign govern¬
ments for decades. When he left the Truman White House in 1950,
Clifford announced, “I have not and will not register as a lobbyist, for
that is not the kind of work we do. We run a law office here.” In
January 1951, however, he registered with the Justice Department as a
foreign agent for Indonesia’s Sukarno regime.

Clifford has long portrayed himself as a staunch friend of Israel —
particularly since BCCI and its murky background have been in the
news. He was, after all, one of the aides who advised Truman to
recognize the Jewish state. When Clifford was asked in 1991 to name
the “most rewarding experience” of his career, he said, “Helping play
a role in the creation of the state of Israel. The behind-the-scenes
maneuvering building up to that event was extraordinary.” What he
failed to mention is that his advice to Truman, according to Secretary
of State George C. Marshall, was based not on sympathy for the
Zionist cause but on electoral arithmetic: support for Israel could help
Truman win Jewish votes in the 1948 election. (Clifford has asserted
that his position was based on “the national interest.”)

He has, in fact, proved highly adaptable over the years, arguing the
brief presented to him by whatever client happens to be paying the bills

( III

Friends in High Places

at the moment. In 1971, Israel's great friend started representing the
radical Arab state of Algeria. He failed to register as a foreign agent for
Algeria until 1975, however, and then only after the Justice Depart¬
ment wrote to him about the oversight.

At the same time that Clifford was serving foreign interests, he was
carrying out foreign policy errands for the United States. When Carter
was in the White House, Clifford acted as a roving ambassador to the
eastern Mediterranean. “On one occasion, [Carter] sent me to
Greece,” he later said. “On one occasion he sent me to Cyprus when
there was a flareup.” At that time, Clifford was representing Arab
clients with major interests in the region. In January 1980, Carter sent
Clifford to India to reassure Premier Indira Gandhi that increased U.S.
aid to Pakistan (in response to the Soviet invasion of Afghanistan)
would not undermine her country’s security. He then returned to
Washington to continue representing Abedi, one of the top advisers to
Pakistan’s President Zia.

After becoming chairman of First American Bankshares in 1982,
Clifford placed other well-connected men on the board, including his
old friends Stuart Symington, James M. Gavin, and Elwood R. Que-
sada. (Symington died in 1988, Gavin in 1990.) Symington had spent
twenty-four years in the Senate, chairing the Armed Services Commit¬
tee and serving on the Foreign Relations Committee. Gavin, a retired
army general, had been one of the most respected American military
leaders in World War II. During the 1960s, he served as Kennedy’s
ambassador to France and then as chairman of Arthur D. Little, the
consulting firm. Quesada, another former general, had been a military
aide to Eisenhower during World War II, then served in Eisenhower’s
administration and as a Lockheed executive before becoming promi¬
nent in Washington real estate. In 1988, Charles McC. Mathias, a
former Republican senator from Maryland, joined the board. He had
been a member of the Senate committee that investigated Bert Lance in
I 977-

A closer look at the backgrounds of First American’s board mem¬
bers reveals that several of them have been extremely helpful to the
Arab lobby; a few were heavily involved in pro-Arab political activi¬
ties.

Symington had chaired the Middle East Subcommittee of the Senate
Foreign Relations Committee and was generally supportive of Israel.
However, as a member of the Subcommittee on Multinational Corpo¬
rations in 1976, he had helped to scuttle an investigation of Arab

FALSE PROFITS

H2. )

investments in the United States. When he voted against demanding
records from American banks, the probe came to a halt. The inquiry
had been launched partly because of the controversy that surrounded
the investments in American banks by three men associated with
BCCI: Ghaith Pharaon, Khalid Bin Mahfouz, and Adnan Khashoggi.
Symington retired from the Senate shortly after that vote. In 1978, he
began assisting Clifford in the First American takeover.

Mathias had taken flak from supporters of Israel for voting in favor
of two important arms sales to Saudi Arabia: the Carter administra¬
tion’s F-15 deal in 1978 and Reagan’s AWACS deal in 1981. He had
also published an article in Foreign Affairs in the spring of 1981 that
criticized the pro-Israel lobby, “Ethnic Groups and Foreign Policy.”

First American’s flagship bank in Washington, D.C. — First Ameri¬
can Bank N. A. — had several board members with interesting connec¬
tions.

• Charles J. DiBona was the president of the American Petroleum
Institute, the lobbying arm of the major American oil companies.
Many of these firms have been prominent advocates of Arab
interests in the United States.

• Richard Lesher, the president of the U.S. Chamber of Commerce,
had written to every member of the Senate on the day of the
AWACS vote, urging them to support the deal.

• Lucius D. Battle was the president of the Middle East Institute, a
public policy organization in Washington. Steven Emerson, au¬
thor of a book on Saudi lobbying activities, has described the
institute as a “public relations outlet” for Arab interests. Battle
was also associated with the American Arab Affairs Council,
another pro-Arab group.

• Robert Keith Gray, a Washington lobbyist and public relations
man with the firm of Hill and Knowlton,* has had a number of
Arab clients over the years, including the Arab League, Adnan
Khashoggi, and Prince Talal bin Abdel-Aziz ibn Saud, an import¬
ant member of the Saudi royal family. In 1990, the firm received
millions of dollars in fees from the government of Kuwait to drum
up support in the United States for military action against Iraq.

*Gray headed the Washington office of Hill and Knowlton, a major public relations
firm, until 1981, when he started his own firm. Gray & Co. He returned to Hill and
Knowlton five years later.

Friends in High Places ( 113

Hill and Knowlton has also done public relations and lobbying
for both BCCI and First American.

Clifford’s chairmanship of First American meant that he was now
presiding over one of the largest lending institutions in the Washington
area, and many of its customers were politicians. This was not a totally
new experience for him. Long before the takeover, he had joined the
board of National Bank of Washington (NBW), as did his friend
Elwood Quesada. In 1972, a lobbyist named Robert Winter-Berger
noted in his book, The Washington Pay-off ’ that NBW “does a great
deal of business with congressmen.” (NBW collapsed in 1990.)

A big proportion of First American’s lending was to real estate
developers, and this, too, was familiar to Clifford. In the 1970s, his
law firm became involved in one of the biggest real estate projects in
the Washington area: Avenel, a development of expensive houses —
and mansions — in Montgomery County, Maryland. Some of the most
prominent people in Washington either live or have bought houses
there, including Richard Allen, Reagan’s first national security adviser;
Senator John Glenn, an Ohio Democrat; and Michael Armacost, who
served as undersecretary of state in the Reagan administration (and is
a brother of Sam Armacost, a former president of Bank of America).
Other buyers included Brian Jensen, a senior official at the World Bank
who went to work for BCCI’s Washington office, and Gil Simonetti, a
partner in Price Waterhouse, BCCI’s accounting firm.

The Avenel project is intriguing for several reasons. For one thing,
the source of the money used to pay for the land is a mystery; the bulk
of it — $12.5 million — was transferred to the United States from a
secret bank account in Basel, Switzerland. For another, the man who
developed Avenel, Tony Natelli, had a very interesting background. In
the 1960s, he headed the Milan office of Peat Marwick Mitchell, a
leading accounting firm. One man who claimed to use that firm was
Michele Sindona, a Sicilian financier with ties to the Mafia who later
became involved in one of the biggest banking scandals in history. v
Natelli was never accused of wrongdoing in the Sindona affair, but he
was found guilty of violating U.S. law for his role in another famous

*In 1974, Sindona’s Milanese bank, Banca Privata Italiana, and his New York Bank,
Franklin National, collapsed as the result of fraud. Franklin had been the twentieth-largest
bank in the country, and its collapse was the largest bank failure in U.S. history. Sindona
was eventually convicted of fraud and other charges in both the United States and Italy.
He died in 1986. Natelli has denied any business dealings with Sindona.

FALSE PROFITS

114 )

financial scandal, the collapse of National Student Marketing Cor¬
poration (NSMC). Using a variety of gimmicks, NSMC grossly in¬
flated its profits, and when the company’s true condition was revealed,
the stock price plummeted and investors lost an estimated $200 mil¬
lion, Natelli was found guilty in 1974 of approving the filing of a false
proxy statement with the Securities and Exchange Commission; he
was fined and sentenced to sixty days in prison. (He was pardoned in
December 1980 by President Carter.)

The Avenel project was the subject of an FBI investigation in 1986
because of questions about the way some of the land was acquired
from a local utility company, the Washington Suburban Sanitary Com¬
mission (WSSC). One large parcel, which was used to develop a golf
course, was sold by the WSSC for just ten dollars, according to the
deed of sale. The justification for it was that the WSSC retained the
right to build a facility on the golf course, but it has never been built.
The FBI investigation was ended with no charges filed.

Clifford and his law firm were involved with Avenel in several
different ways. The firm apparently represented the seller of the prop¬
erty, Sheffield Enterprises, Inc., a Liberian-registered company. It also
acted as trustee for the money shipped in from the secret Swiss bank
account. Legal experts say that this was apparently a conflict of inter¬
est for the firm. In addition, First American was a major lender to the
developers of Avenel and to many of the people who bought houses
there.

Under Clifford, First American also lent substantial sums to in¬
siders, including some of the prominent people who served on the
boards of its subsidiary banks. One such borrower was Robert Gray,
who dabbled in real estate with some of the money he earned in his
lobbying business. He owed the bank $2.5 million at the end of 1989,
according to a list of insider loans. (Gray declines to comment.)

Another man who lobbied for Arab interests was also a big bor¬
rower, Michael Deaver. He was a senior official in the Reagan White
House from 1981 until 1985, when he set up a lobbying firm. First
American granted him a $1 million loan secured by his house. In an
effort to attract business, Deaver shamelessly flaunted his friendship
with Reagan and achieved considerable success. One lucrative client
was Saudi Arabia. (Deaver was later convicted of lying to a federal
grand jury and a congressional committee about his lobbying activi¬
ties.) When asked about the loan, Deaver said it was unrelated to his
business.

Friends in High Places ( 115

Robert Novak, a nationally syndicated columnist known for his
harsh criticism of Israel, obtained a loan denominated in British
pounds from First American. He says there was nothing untoward
about this deal, and there is no evidence to the contrary. But he also
appeared in a First American television commercial. (He gave the
$10,000 fee to charity.)

One of First American’s most intriguing transactions was a loan to a
leading candidate for president of the United States.

In 1984, the main contenders for the Democratic nomination were
Walter Mondale, a former vice president, and Senator Gary Hart of
Colorado. The Hart campaign received about $700,000 in loans from
First American — by no means a routine transaction. First American
was the biggest single source of credit for the campaign.

Hart’s campaign manager, Oliver Henkel, has said he doubted that
Abedi brokered the First American loans. But a former BCCI official
thinks this is exactly what happened. In early 1984, says this source,
Abedi and Swaleh Naqvi were at the Helmsley Palace Hotel in New
York, preparing to meet with BCCI officials from the Americas. The
meeting was suddenly postponed, however, because “Abedi and Naqvi
have gone to D.C. to meet with Gary Hart.” Hart, this source con¬
tinues, “was introduced to Abedi by Clark Clifford. Mr. Abedi liked
him and financed his campaign.”"' Hart insists that he has no recollec¬
tion of meeting Abedi. However, his memory does not seem to be
totally reliable. For example, he says he recalls that National Bank of
Washington rather than First American was the biggest lender to his
campaign.

In the 1988 campaign, one Democrat was far more sympathetic to
the Arab point of view than any other major presidential candidate in
history: Jesse Jackson. During a visit to the Middle East in 1979, he
embraced Yassir Arafat, the leader of the PLO, and called for the
United States to recognize the organization. Jackson further alienated
Jewish voters when he made anti-Semitic remarks five years later and
would not repudiate the black Muslim leader Louis Farrakhan, an
anti-Semitic demagogue.

Jackson was able to count on backing from Arab governments as
well as many Arab Americans. In 1979, the government of Libya gave

*The Mondale campaign later made an issue out of Hart’s acceptance of loans from
First American because of its Arab ownership, and Hart repaid the loans.

FALSE PROFITS

II 6 )

$10,000 to Jackson’s organization PUSH for Excellence (PUSH-
Excel). The following year, the Arab League contributed to PUSH-
Excel as well as to a group of Jackson’s called the PUSH Foundation,
according to Clovis Maksoud, the PLO’s envoy to the United Nations.
The Saudi Arabian government seemed to have a special regard for
Jackson. In 1979, he attended a dinner in Washington in honor of
Ahmed Zaki Yamani, the kingdom’s oil minister. Representing the
Carter administration was Patrick Caddell, who had been on the Saudi
embassy’s payroll three years earlier. In a speech after the meal,
Yamani singled out three American politicians for praise: Charles
Percy, the Republican senator from Illinois who would later help steer
the AWACS deal through the Senate; John Connally, Pharaon’s busi¬
ness partner; and Jesse Jackson. The host of the dinner was Kamal
Adham’s friend Hassan Yassin, the Saudi lobbyist who had been in¬
volved in the First American takeover.

When Jackson was running for president in 1988, he got a boost
from Saudi Arabia’s lobbyist Fred Dutton. In June, Dutton published
an op-ed piece in the Los Angeles Times touting Jackson as a vice-
presidential candidate. (The Times identified Dutton as a Democratic
party activist, failing to mention that he was also a registered foreign
agent for Saudi Arabia.)

One of Jackson’s handicaps was that he was viewed as too radical by
many members of the Democratic establishment. In March 1988, a
few of his advisers got together to remedy that by staging a political
breakfast in Washington at which Jackson could meet with party
elders. One guest was Frank Mankiewicz, who happened to be the
number-two man in the Washington office of Hill and Knowlton,
under First American’s board member Robert Gray. The breakfast was
organized by a former BCCI consultant, Bert Lance, and the star
attraction was none other than Clark Clifford. Afterward, Clifford
praised Jackson and said that if he were elected, he would bring to
Washington “the best brains the party and the country have to offer.”
Jackson, according to a campaign aide, “frequently told reporters that
Clark Clifford was among his ‘top policy advisers.’ ”

It may not be a coincidence that all of these people had ties to the
BCCI network.

Abedi knew Jackson well. “Jackson and his son were regular visitors
to BCCI-London,” says a former bank official. Lance recalls that he
introduced them in 1985, when Jackson was passing through London
after meeting with Pope John Paul II. Jackson and his son had dinner

Friends in High Places ( 117

with Abedi, Naqvi, Lance, and Lance’s son at the home of Sonny
Ramphal, the secretary-general of the Commonwealth. Not long after
that, says Lance, Altaf Gauhar “talked to Jesse about doing some
writing” for South magazine.

That same year, BCCI gave Jackson about $11,000 in travel ex¬
penses, according to Nazir Chinoy, a former bank official. He added
that Jackson implied that he could help BCCI procure deposits from
African central banks. (Jackson has acknowledged accepting the travel
money but denied having any business relationship with BCCI or
Abedi.)

During the 1988 campaign, senior BCCI officials were enthusiastic
supporters of Jackson, according to former employees of the bank.

Associates of Abedi also had connections to the man who won the
election: George Bush. BCCI and its allies had extensive ties to admin¬
istration officials and relatives of the president’s. Robert Altman, for
example, hobnobbed with several cabinet members, while BCCI’s Mi¬
ami branch manager, Abdur Sakhia, socialized with Jeb Bush. The
president himself had ties to BCCI associates. For example, when he
ran the CIA in the 1970s, he worked closely with Saudi intelligence,
then headed by Kamal Adham.

The CIA, in fact, was quite familiar with Adham and the entire
Abedi network, and it suspected that BCCI was more of a political
organization than a commercial enterprise. A classified memo on
BCCI in the mid-1980s noted that its “principal shareholders are
among the power elite of the Middle East, including the rulers of
Dubai and the United Arab Emirates, and several influential Saudi
Arabians.” It also said that money wasn’t the major motive for BCCI’s
backers. “They are less interested in profitability,” the agency wrote,
“than in promoting the Muslim cause.”

The CIA was in a good position to analyze Abedi’s bank. It was a
customer of BCCI’s and used the bank in a multitude of ways. In fact,
the bank’s relationship with the CIA was so close that BCCI became
involved with the U.S. government in a series of covert operations.

Covert Operations

The Saudi s pymaster Kamal Adham likes to work several sides
of a deal. In 1965, Northrop, the arms manufacturer, received a letter
from one of its agents, Kermit Roosevelt, stating that Adham appeared
to be representing three foreign aerospace contractors simultane¬
ously — and was trying to sign up Northrop as well. Adham, Roose¬
velt wrote, “already has a piece of the Lightning deal, the Mirage deal,
and the Lockheed deal and is trying to complete the square by an
arrangement with Northrop.” In other words, Adham stood to receive
a commission from just about every major military aircraft purchase
that Saudi Arabia was making. Despite these apparent conflicts of
interest, Roosevelt advised Northrop to hire Adham. “Without him,”
he wrote, “we are going to be weakly represented.”

The CIA felt the same way about Adham, one of its closest friends
anywhere outside the United States, for he became one of its principal
liaisons for the Middle East in the mid-1960s. Even though he was the
head of Saudi intelligence, he could also assist the CIA in furthering
U.S. interests. There would be no conflict because there were enough
similarities in policy aims. Besides, who else could the agency work
with? In a theocratic and absolutist society struggling to come to terms
with the modern world, Adham was one of a handful of Saudis at the
center of power who had the background to cope with international
issues of intelligence, foreign policy, and defense. A courtly figure,
Adham is cosmopolitan — particularly by the standards of his coun¬
try.

He was born in Turkey in 1929 to a Turkish mother and a father of
Albanian extraction and taken a year later to Jiddah, the Saudi city

( 118 )

Covert Operations ( 119

with the strongest foreign influence. Every year in the month of hajj
(“pilgrimage”) in the Islamic calendar, Muslims from all over the
world pass through Jiddah on their way to Mecca. In contrast, the
central Najd region, where the capital of Riyadh is situated and the
Saudi ruling family makes its home, is a more closed and austere
society. Adham set out on an international course at a young age. He
was educated at Cairo’s Victoria College, which is modeled on Brit¬
ain’s elitist public schools, and he learned several languages. In addi¬
tion to Arabic and English, he speaks some Turkish, French, and
Italian.

Adham’s entree to the ruling al-Saud family was provided by a half-
sister, Iffat, the favorite wife of King Faisal, the country’s ruler from
1964 until his assassination in 1975. E)uring this period, Adham was
one of the most powerful men in Saudi Arabia. He has been described
as Faisal’s “closest confidant and adviser” and his “right-hand man.”
In 1963, with Faisal’s backing, Adham became the first head of Saudi
Arabia’s intelligence service, a post he held until September 1977
(shortly before he began buying stock in First American). Until 1979,
Adham remained, in his own words, the “king’s adviser for security
matters,” and he continued as an adviser to the government.

At home, the Saudi regime faced many threats during Adham’s early
years in intelligence, from dissident members of the ruling family,
foreigners who lived in the kingdom, Nasserites, religious zealots, and
rebellious members of the armed forces. In 1969, for example, there
were at least two attempts at a coup. Externally, the ruling family was
preoccupied with the threat of radicalism and subversion from its
more populous southwestern neighbor, Yemen, which was then beset
by factional fighting that periodically erupted into civil war. While the
Saudis supported the traditional royalists, Egypt — at that time the
fount of Arab nationalism under Gamal Abdel Nasser — backed those
advocating a socialist republic. In a series of meetings with the Egyp¬
tians, Adham helped to calm the situation and prevent a more direct
Saudi-Egyptian confrontation in Yemen. During these years, the early
and middle 1960s, Adham became friendly with Anwar Sadat, the
Egyptian vice president and future president. They became so close
that Adham was known as Saudi Arabia’s “Mr. Egypt.” One way that
he cultivated Sadat was by showering hundreds of millions of dollars
in Saudi funds on him and his country.

Throughout his period as intelligence chief, Adham maintained
close ties with the spy agencies of Britain, France, and the United

FALSE PROFITS

120 )

States. The British, for example, advised the Saudis on internal security
during the early 1960s. A former British intelligence officer who lived
in Jiddah and spoke frequently with Adham about the fighting in
Yemen remembers him as an intelligent and genial man who liked to
eye the girls lounging around the swimming pool.

The British, though, played second fiddle to America in Saudi Ara¬
bia, as they had since World War II. Saudi-British relations were
marred by periodic disputes over the border between Saudi Arabia and
Abu Dhabi, a British protectorate. Nevertheless, Adham was well
connected in Britain. One of his friends was Julian Amery, a Conserva¬
tive member of Parliament who served for a time as minister of air.
Amery, as noted earlier, later supplemented his salary by acting as a
paid adviser to BCCI.

Adham was always closer to the CIA than to the British intelligence
services. In fact, the U.S. agency had not only helped him set up Saudi
Arabia’s internal security service in the early 1960s; some sources
believe the CIA may have trained him at its headquarters in Langley,
Virginia. Adham, for his part, was willing to help CIA alumni. When
Raymond H. Close, the agency’s station chief in Saudi Arabia for seven
years, retired in December 1977, Adham arranged for him to be spon¬
sored by a company called National Chemical Industries, which was
run by a nephew of the Saudi’s. (All foreign businessmen living in
Saudi Arabia require a local partner or sponsor.) 8 '

At the Saudi court, Adham was the leading advocate of a more
engaged and pro-Western foreign policy. (Another adviser who held
this view was Ghaith Pharaon’s father, Dr. Rashad Pharaon.) And by
the early 1970s Adham was not only Saudi Arabia’s most important
link to Egypt, he was also King Faisal’s premier backchannel to the
United States. Those two links would be invaluable to Western policy¬
makers, who were desperate to draw Egypt, the most populous Arab
nation, away from Soviet influence. Within weeks of Nasser’s death in
1970, King Faisal sent Adham to Cairo to suggest to Sadat that he cut
back his ties to the Soviets in exchange for increased aid.

By July 1972, Sadat had decided to signal to the United States that
he was prepared to adopt a more pro-Western stance; Adham was the
channel he used to communicate with Henry Kissinger, President

*In an interesting historical note. Close was a nephew of William Eddy, who had
arranged President Roosevelt’s historic meeting with King Abdel-Aziz and acted as inter¬
preter.

Covert Operations ( 121

Nixon’s national security adviser. On July 13, a message was sent
through Adham: if the United States had something to propose, Egypt
would send an emissary to Washington. Days later, Sadat delivered “a
bombshell,” as Kissinger later termed it, giving fifteen thousand Soviet
military advisers one week to leave the country; further, all Soviet
military bases built since 1967 would become Egyptian property.

At about this time, Adham’s path crossed that of Abedi. The Paki¬
stani banker was regularly visiting Saudi Arabia, desperate to get a
license there for BCCI, which was still being planned. Abedi’s United
Bank had a share in one of these coveted licenses, which eluded even
such international financial behemoths as Chase Manhattan and Bar¬
clays Bank. But the Saudis just didn’t want any more foreign banks; the
existing ten or so were enough.

Abedi didn’t give up; he set about building his influence and contacts
in his time-honored way of socializing with the rich and powerful.
Through the Jiddah representative of a Lebanese bank in Saudi Ara¬
bia, Abedi met Adham, according to a close associate of both men who
was living in Jiddah at the time. Adham, so the story goes, was friendly
with the glamorous secretary at the Lebanese bank. Sensing a job
prospect with Abedi and seeking to impress him, the Lebanese banker
introduced the two men. Adham himself says that he met Abedi
through one of his own Pakistani secretaries.

Meanwhile, Adham continued to prove his value to the United
States. In May 1973, he delivered a message to Frank Jungers, the chief
executive of Aramco, the consortium of U.S. oil companies in Saudi
Arabia/* Adham warned that Sadat might well wage war against Israel
and that there could be an oil embargo.

Adham’s role in encouraging favorable attitudes toward the West —
and nudging Egypt into the American sphere of influence — made him
a valued American asset. His importance became abundantly clear
during the presidency of Jimmy Carter.

When Carter was urging Egypt to make peace with Israel, Adham’s
close ties to the Sadat family were of vital importance. Adham had not
only been a conduit for Saudi aid to Cairo, he was a business associate
of Sadat’s wife, Jehan, and other members of the family.

Carter’s foreign policy achieved a dramatic boost when, in Novem¬
ber 1977, Sadat made a grand gesture toward an accommodation with

* Aramco was later acquired by the Saudi government and renamed Saudi Aramco.

FALSE PROFITS

122 )

Israel by flying to Jerusalem and declaring his commitment to negoti¬
ate peace. This in turn led to the signing of the historic Camp David
Accords in September 1978 by Sadat and Menachem Begin, the Israeli
prime minister. The following March, a formal peace treaty was con¬
cluded at the White House.

Adham had tried hard to persuade the Saudi ruling family to partic¬
ipate in the peace talks. The State Department tried to persuade Crown
Prince Fahd that Saudi Arabia should be part of the peace process; the
kingdom was already an important patron of Sadat’s, supplying as
much as $3 billion in aid to Egypt in 1977. Although Adham strongly
supported the Americans, Fahd was guarded; the risks appeared too
great.

So America was frustrated, and those who had sided with the U.S.
cause in the debates in Saudi Arabia and the Persian Gulf sheikhdoms
suffered. On January 19, 1979, King Khaled announced that Adham
had been dismissed from his post as a royal adviser. He was being
punished for criticizing Saudi Arabia’s opposition to the peace initia¬
tive.

Such a public rebuke is rare in Saudi Arabia. But King Khaled and
Crown Prince Fahd, his brother and successor, seemed ready to slight
their adviser to help calm public anger at the Camp David settlement.
To many Arabs, the Egyptians had abandoned their cause, relinquish¬
ing the strongest card that the Arab nations have to play: the formal
recognition of Israel. With the exception of a few nations, such as
Morocco and the Sudan, the Arab countries severed their diplomatic
ties with Cairo.*

Even though Adham had been publicly humiliated, he remained
influential in Saudi Arabia’s ruling circles. In Washington, his stature
rose dramatically. In 1981, the U.S. government permitted a group of
BCCI clients led by Adham to acquire First American Bankshares, one
of the most important banking institutions in Washington.

Was this a payment for Adham’s help on Camp David — and the
other assistance provided to Washington over the years — or was there
no connection? The timing suggests a quid pro quo. The First Ameri¬
can takeover battle occurred just as Adham was involved in Camp
David. Another coincidence concerns one of the parties involved in the

*Egypt’s estrangement from most other Arab countries lasted for several years. In
December 1983, Jordan restored full diplomatic relations with Cairo. Many other Arab
countries eventually followed suit.

Covert Operations ( 123

acquisition. After the Camp David Accords were signed, the United
States agreed to provide additional arms to Egypt, and it awarded an
exclusive contract to ship the weapons to a little-known company
called Tersam. The columnist Jack Anderson revealed that Tersam’s
silent partner and financial backer was Ali Mohammed Shorafa, a
member of the group permitted to buy First American and one of
Sheikh Zayed’s top advisers.

The takeover, of course, enhanced Adham’s status in Saudi Arabia,
since he could use First American to promote the kingdom’s interests
in Washington. Abedi was happy to put his network at the disposal of
his friends and patrons in the Middle East and Pakistan, including
government officials and intelligence officers. He also helped the
Americans: BCCI became an important tool of U.S. intelligence.

Abedi, with his taste for intrigue, found the world of espionage
alluring. Intelligence agencies, for their part, are always on the lookout
for “assets” — individuals and institutions in a position to gather
secrets, transmit money, and exert influence behind the scenes. BCCI
was a particularly attractive mechanism. Its network included offices
throughout the Third World; in many developing countries, it was one
of a handful of foreign banks — sometimes the only one. Wherever
BCCI operated, Abedi and his minions tried to make connections with
the local power elite, and they soon developed an intimate relationship
with the CIA.

The precise origin of the CIA’s relationship with Abedi is difficult to
establish, but it may well have gone back to the bank’s earliest days,
perhaps to before BCCI’s founding in 1972. When Abedi was placed
under house arrest by Bhutto the year before, it was because he was
suspected of helping the previous military regime. But Bhutto’s hostil¬
ity was also based on his suspicion that Abedi had ties to American
intelligence. On several occasions, Bhutto said publicly that Abedi was
in league with the CIA. Similar rumors swirled around the late Hussein
Gokal — whose sons Mustapha, Abbas, and Murtaza ran the Gulf
Group after he died around 1970. The Gulf Group was the biggest
borrower from BCCI. The three brothers seemed to have impressive
connections in the U.S. government; their companies were heavily
involved in shipping goods to Third World countries supplied by
American aid programs.

After Abedi launched BCCI, several people with intelligence back¬
grounds appeared on the bank’s list of shareholders. Kamal Adham, of

FALSE PROFITS

124 )

course, was the most notable example. Close associates of his in Saudi
intelligence were also shareholders. Prince Turki bin Faisal al-Saud
served as Adham’s deputy from 1973 to I 977? when he succeeded
Adham. As the head of Saudi intelligence, he has been the CIA’s princi¬
pal liaison in the kingdom. Abdul-Raouf Khalil, who has an engineer¬
ing and communications background, was a senior aide to Adham and
remained in the Saudi agency after Adham’s departure. Khalil contin¬
ues to serve in the Saudi government, according to his American law¬
yer. Like Adham, Khalil also held stock in First American.

Two top officials of Pakistani intelligence agencies worked for BCCI
satellites. Akram Shaikh, the former director of the intelligence bu¬
reau, worked for Attock Oil in Pakistan until 1989, when he returned
to the intelligence bureau. Saghir Anwar, the former head of the Fed¬
eral Investigative Agency, worked for International Travel Corpora¬
tion in London. A BCCI banker named Amjad Awan is the only son of
Ayub Awan, a top-ranking police and intelligence official until his
retirement in the late 1960s; he also served as interior secretary, direc¬
tor of the intelligence bureau, and director of Inter-Services Intelli¬
gence (ISI), Pakistan’s military intelligence agency.

However BCCI began its association with the CIA, it was heir to a
long tradition of shady banks with close ties to U.S. intelligence agen¬
cies. Several people connected with these institutions also play a part in
the BCCI story.

Deak & Company, a money-changing and private banking group,
was founded by Nicholas Deak, who had served in the Office of
Strategic Services (OSS), the CIA’s World War II precursor. Deak as¬
sisted the CIA on several occasions. In 1953, for example, he provided
untraceable cash for a covert operation in Iran: the overthrow of Prime
Minister Mohammad Mosaddeq, which enabled the shah to return to
power.

Nugan Hand, an international banking group founded in 1973 that
was active in Asia and the Middle East, was involved in money laun¬
dering and arms deals as well as covert operations. Nugan was con¬
nected to an extraordinary number of former U.S. military and intelli¬
gence officials, including William Colby, the CIA’s director from
September 1973 to January 1976. Colby was a lawyer for the bank.

During the 1960s and 1970s, several shady banks in the Caribbean
were associated with the CIA, notably Castle Bank &c Trust Company
and an affiliate called Mercantile Bank and Trust Ltd. Both institutions
were run by an OSS veteran named Paul Helliwell and were used by

Covert Operations ( 125

the CIA for covert operations. Helliwell had been the OSS’s head of
special intelligence in China during the war. Later he worked closely
with the CIA, helping to establish several “proprietaries,” companies
that appeared to be normal private enterprises but were secretly
owned by the CIA. He was involved in founding Civil Air Transport,
Sea Supply, and Air America.

Helliwell was an old colleague of George Olmsted, the head of the
OSS’s China section during the war. Olmsted, of course, controlled
Financial General Bankshares until 1977, when it was taken over by
the Middendorf group, which, in turn, agreed to sell it to BCCI cli¬
ents. * Before that deal, Olmsted’s International Bank had bought two
thirds of Mercantile after it was declared sound by auditors from Price
Waterhouse. Olmsted claimed that he had been snookered. He main¬
tained that $21 million of the $25 million of Mercantile’s assets that
Price Waterhouse had listed didn’t exist. The money had been si¬
phoned off to unidentified borrowers and would never be repaid. The
Bahamian government shut the bank down in 1977 at a cost of $9
million to International Bank. Olmsted threatened to sue the auditors.
A spokesman for Price Waterhouse maintains that the accounts were
“true and fair” under Bahamian accounting principles, which are
similar to British standards.

Three years after the collapse of Mercantile, Nugan Hand went
bankrupt as the result of massive fraud. Interestingly, Nugan Hand
also used Price Waterhouse as its auditor — as did BCCI. In yet an¬
other coincidence, Nugan Hand and BCCI used the same law firm in
the Cayman Islands: Bruce Campbell &C Company. The firm acted as
the registered agent for Nugan Hand. In 1976, it set up BCCI’s most
secretive unit: International Credit & Investment Company Ltd.
(ICIC). Bruce Campbell, which shared the same office building as
ICIC, also organized and managed several other corporate entities
related to BCCI.

ICIC and its sister companies later became a critical link in many of
BCCI’s more outlandish schemes, an off-the-books dummy company
that was used in connection with a vast array of frauds. ICIC became

''There is another intriguing link to the BCCI network. Helliwell used Castle and
Mercantile in connection with tax-avoidance schemes for a number of famous and infa¬
mous people, including American mobsters, prominent Asian politicians, and members of
the Pritzker family of Chicago, which controls the Hyatt hotel chain. The Pritzkers later
went into business with BCCI’s Ghaith Pharaon, who developed Hyatt hotels in Saudi
Arabia and Latin America.

FALSE PROFITS

12 6 )

indispensable by providing a facade of respectability to the financial
affairs of Adham and several other BCCI insiders, many of whom, like
Adham, had ties to the CIA.

General Olmsted was just one of several people at First American with
intriguing intelligence connections. The investment group that ac¬
quired First American in 1977 was led by J. William Middendorf II, a
financier with intimate ties to the national security establishment.
Until a few months before the takeover, he had been secretary of the
navy. In 1980, after Ronald Reagan was elected president, Midden¬
dorf served on his CIA transition team. In early 1981, a businessman
who wanted to build a pipeline in Central Africa held discussions with
both Middendorf and William Casey, the incoming CIA director. Mid¬
dendorf, according to the columnist Jack Anderson, “reportedly said
he liked the idea, but couldn’t get involved because he anticipated
getting a post in the Reagan administration.” He was soon named
ambassador to the Organization of American States. In that post he
would have worked with the CIA, which was involved in several
important covert operations in Latin America.

One member of Middendorf’s investment group was Joseph Far-
land, who had been U.S. ambassador to Pakistan. In that post, he came
into contact with several Pakistani officials who later worked for
BCCI. Farland then served as ambassador to Iran, where BCCI had
impressive political connections. A brother of the shah’s, Prince Mah-
mood Reza Pahlavi, was a BCCI shareholder.

Farland’s immediate successor in Tehran was Richard Helms, a
man with an extraordinary number of connections to the BCCI net¬
work. Helms served as the CIA director from June 1966 until February
1973, a period when America’s relations with Adham and the Saudis
were becoming extremely close. Helms’s tenure caused him consid¬
erable difficulties. In 1977 he was prosecuted for lying to the Sen¬
ate Foreign Relations Committee four years earlier about the CIA’s
attempts to undermine Chile’s President Salvador Allende Gossens.
Helms retained Edward Bennett Williams and Clark Clifford to repre¬
sent him. Williams, the legendary criminal defense lawyer from
the Washington firm of Williams & Connolly, was at that time a
member of the Foreign Intelligence Advisory Board, on which his
friend Clifford had also served. Helms knew Clifford well, having run
the CIA when Clifford was secretary of defense in the Johnson admin¬
istration.

Covert Operations ( 127

Helms’s friends rallied around in his defense: former senator Stuart
Symington, who had served on the Foreign Relations Committee, was
called to testify before the grand jury; he showed his testimony to
Williams before he testified. A close friend of Clifford’s and a future
board member of First American, Symington was intent on helping
Helms. “If they prosecute Dick, the whole temple will come down,” he
warned an attorney in Williams’s firm. Reading Symington’s testi¬
mony, Williams was thrilled, deeming it so muddled that it would
confuse the prosecutor.

With the help of his well-connected lawyers, Helms was able to
work out a favorable settlement with the Justice Department. He
pleaded nolo contendere — no contest — to misleading Congress (as
opposed to perjury). The judge imposed a $2,000 fine and a suspended
two-year jail sentence.

Helms had been forced out of the CIA in 1973, during Nixon’s
ill-fated second term. In a face-saving gesture, the president offered
him an ambassadorship. Helms picked Iran and served there until
1977, when he left the government. In time-honored Washington fash¬
ion, he was quick to cash in on his connections by setting up a consult¬
ing firm. With a remarkable lack of subtlety, he called it Safeer —
which means “ambassador” in Farsi, the language of Iran.*

One of Helms’s associates was Mohammed Rahim Motaghi Irvani,
an Iranian businessman who was a partner, through his Alvand Invest¬
ments Company, with BCCI in Iran-Arab Bank, Abedi’s joint venture
in Tehran. Irvani also controlled the Melli Industrial Group, which
was run by Roy Carlson, the former Bank of America official who had
been involved in establishing BCCI. Both Carlson and Irvani were
founding directors with Helms in the Safeer consulting firm, which
was based in Atlanta.f Irvani held 80 percent of the equity, registered
in the name of Northwest Investment Corporation, with Helms hold¬
ing the balance of the shares, according to correspondence in 1977
relating to the establishment of the company. Its initial clients included
Bechtel, Hughes Aircraft, Martin Marietta, McDonnell Douglas, Mit¬
sui, and Itek, according to company records. When the shah was
ousted in 1979, Carlson and Irvani both moved to Atlanta, and Carl¬
son was named chairman of a BCCI satellite, National Bank of Geor-

* While Helms was the ambassador to Iran, his brother Pearsall ran a consulting com¬
pany in Switzerland involved in U.S.-lran trade.

fHelms and Carlson were also partners in another venture, the Brockton Leather
Company of Boston.

128 )

FALSE PROFITS

gia. Helms took over all of Safeer’s equity that year, at which time
Carlson resigned from the board."*

Before Irvani moved to Atlanta, he was a director and shareholder in
one of the dummy companies set up to acquire First American. Abedi
asked him to become involved in the takeover fight, according to his
son Bahman; Irvani dropped out before the acquisition was consum¬
mated. Helms provided advice to Irvani on his role in the dummy
company in a telex dated October 20, 1978, setting out the legal
language that Irvani should use to protect himself when he gave his
power of attorney to “any partner of Clifford, Glass, Mdlwain &
Finney [as Clark Clifford’s firm was then called] . .. with respect to the
transaction involving Financial General Bankshares of Washington
D.C.” Helms has described reports of his involvement with Irvani’s
role in the takeover, including the telex, as absolute nonsense.

Regardless of what Helms says, no one can deny that virtually every
major character in the takeover was connected in one way or another
to U.S. intelligence: Olmsted, who controlled the company for years;
Middendorf, who headed the group that acquired it from him; Abedi,
who arranged for clients of BCCI to buy the company from Mid-
dendorf’s group; Irvani, the chairman of one of the dummy companies
set up to carry out the acquisition; Helms, who advised Irvani; Adham,
the lead investor in Abedfs group; Clifford, who steered the deal
through the regulatory maze and then became the chairman of the
company; and Symington, who assisted Clifford and then became the
vice chairman.

After the BCCI group gained control of First American, two men
with links to U.S. intelligence joined the board of its Washington, D.C.,
bank. The lobbyist Robert Gray of Hill and Knowlton often boasted of
his close relationship with the CIA’s William Casey; Gray used to say
that before taking on a foreign client, he would clear it with Casey.
Karl G. Harr, Jr., a lobbyist for the aerospace industry, had been on the
staff of the National Security Council in the late 1950s. He had served
on the Operations Coordinating Board, which was involved in over¬
seeing the CIA’s covert operations.

Can this all be a coincidence? Or is it possible that First American
was affiliated with U.S. intelligence all along and that it was simply
passed from one group of CIA associates to another, and then another?
No proof has emerged that this is what happened, but it is certainly not

’’'Carlson has declined requests for interviews and in 1992. refused to testify before
Congress, citing his constitutional rights against self-incrimination.

Covert Operations ( 129

a farfetched theory, especially when one takes other “coincidences”
into account.

For example, a former BCCI official, Akbar Bilgrami, has testified
that when he worked for the bank, he found indications that it may
have secretly controlled First American. When asked what he learned,
Bilgrami said he was told by Issan Kabbani that BCCI and First Amer¬
ican were part of “the same group.” Kabbani happened to be a Saudi
official who went into business with Raymond Close, the former CIA
station chief in Saudi Arabia, around the time the takeover battle
began. Close, of course, was also a business associate of Kamal Ad-
ham’s.

Another set of relationships is equally intriguing. In the early 1980s,
Hassan Yassin, the Saudi lobbyist who, according to Adham, recom¬
mended that he invest in First American, served on the boards of two
financial institutions: Hong Kong Deposit and Guaranty Company
Limited and Tetra Finance (H.K.) Limited. Both of these companies
were licensed by the Hong Kong government as “deposit-taking com¬
panies,” which meant that they could engage in banking but were
forbidden to take small deposits from retail customers. Both compa¬
nies collapsed in 1983, and depositors suffered large losses.

Yassin was not the only person with ties to BCCI on the board of
those companies. Serving with him was Ghanem Faris al-Mazrui, the
head of Sheikh Zayed’s Department of Personal Affairs as well as
Zayed’s representative on the board of BCCI. A third board member
was John M. Shaheen, an Arab-American businessman.

Shaheen was very well connected in U.S. intelligence circles. He was
a veteran of the OSS and one of the closest friends of the head of the
CIA, William Casey. A few years after the collapse of the Hong Kong
deposit-taking companies, Shaheen and two of his business associ¬
ates — Roy Furmark and Cyrus Hashemi — played important roles in
the Iran-contra affair, as did Casey and BCCI.

The BCCI network’s ties to the CIA extended to the very top of the
agency, for Adham worked with a series of CIA directors, including
George Bush.

When Bush became director in January 1976, the CIA’s image had
never been worse. During the previous few years, journalists and
congressional investigators had uncovered shocking and illegal con¬
duct. American intelligence officers had secretly funded nonprofit or¬
ganizations in the United States and publishing businesses abroad.
They had spied on U.S. citizens and had even tried to assassinate

FALSE PROFITS

130 )

foreign leaders. There were several schemes to kill Fidel Castro, one
of which involved an alliance between the CIA and American mob¬
sters.

Bush saw it as his mission to restore the CIA’s image and improve
relations with Congress. In his one year as director, he appeared more
than fifty times on Capitol Hill. In the years since, it has become clear
that he never really carried out a house-cleaning. Some of his ap¬
pointees later acquired notoriety; Theodore Shackley, whom Bush
appointed associate deputy director for operations, later became em¬
broiled in the Iran-contra affair and other dubious covert operations.
Bush also “ignored repeated signals that rogue, off-the-books opera¬
tions by former agents were out of control, leading to Agency acquies¬
cence in illegal activities,” according to an article by Scott Armstrong
and Jeff Nason, two experts on national security issues. It was during
Bush’s tenure that Edwin Wilson, a former CIA operative, began sell¬
ing his services to the Libyans, using his access to the agency to
advantage. Bush also helped to strengthen ties between the CIA and
Saudi intelligence.

When, in June 1976, a terrorist bomb killed the U.S. ambassador to
Lebanon, Francis E. McCloy, Bush successfully pushed the case within
the administration for evacuating American citizens from that country,
a move that could hardly be criticized. But he also instituted a more
questionable policy. In an effort to obtain better information on terror¬
ism, the CIA strengthened its relationships with so-called friendly
Arab intelligence agencies. One of the most important of these was
Saudi Arabia’s intelligence service, run by Kamal Adham, Prince Turki,
and Abdul-Raouf Khalil, all of whom were BCCI insiders.

Did the Arab spies get something in return? The CIA, according to
intelligence experts, tacitly agreed to look the other way when friendly
agencies conducted operations in the United States. The fruits of this
policy quickly became apparent. A few years later, Adham and Khalil
became involved in the First American takeover battle — with no
hindrance from their friends at the CIA. Later, as we shall see, Adham,
Khalil, and other BCCI insiders would forge connections with other
sensitive industries, including telecommunications and cable televi¬
sion.

The threat of terrorism was not the only issue that helped to
strengthen ties between America’s military-intelligence establishment
and the conservative autocracies of the Middle East. Even more im¬
portant was a series of upheavals in 1979.

Covert Operations ( 131

Shah Mohammad Reza Pahlavi of Iran was regarded as one of the
West’s most important allies in the Middle East. With his large military
forces — equipped with billions of dollars’ worth of American arms —
the shah could act as America’s “policeman” in the Persian Gulf. To
ensure continued U.S. support, the shah, like the ruling family of Saudi
Arabia, went to great lengths to cultivate influential Americans.

One strong backer of the shah was William P. Rogers, Nixon’s first
secretary of state, who favored increased U.S. arms sales to Iran. Some
of those deals were financed with taxpayer-subsidized loans from the
U.S. Export-Import Bank, which was headed by William Casey, a
Nixon appointee. When Rogers and Casey returned to their New York
law firm, Rogers &C Wells, the shah awarded business to the firm and
placed Rogers on the board of his Pahlavi (New York) Foundation.
(Casey, of course, went on to become Reagan’s CIA director.)

Although the U.S. government loved the shah, millions of Iranians
were outraged at the corruption of his regime and the repression by his
Savak (secret police), enabling the Ayatollah Khomeini to force him
from power early in 1979. The Iranian revolution provoked fears that
similar rebellions would erupt in the conservative Arab monarchies.
Most of the sheikhs governed restive Shia populations who had often
suffered discrimination at the hands of their Sunni rulers. Broadcasts
from Iran urged Arab Shi’ites to rise up against their decadent rulers.

In November 1979, armed fundamentalists in Saudi Arabia seized
the Grand Mosque in Mecca, the holiest Muslim shrine. Loudspeakers
were set up, and the rebels began broadcasting attacks on the regime.
The leader of the siege said he would rid the country of “corrupt
princes.” A Western journalist living in Saudi Arabia at the time re¬
called that “corruption in the royal family was one of the main things
the rebels talked about,” adding that “all of Mecca could hear what
they were saying.” After weeks of fighting left hundreds dead, the
rebels were captured and as many as sixty-three of them were exe¬
cuted. * In December there was yet another upheaval, the Soviet inva¬
sion of Afghanistan, which posed a threat to the pro-West regimes in
the region.

The traumas of 1979 led to a dramatic increase in military and
intelligence cooperation among the United States, Saudi Arabia, and

*The mosque rebellion also caused more immediate problems for some of BCCI’s close
allies in Saudi Arabia. Pharaon later complained that his bank creditors flew away “like a
flock of pigeons” in response to the uprising. He received some recompense, however: one
of his companies was awarded the contract to clear up the damage done to the Grand
Mosque.

FALSE PROFITS

13 * )

Pakistan, resulting in multibillion-dollar arms deals, secret schemes to
arm Iran and Iraq, and a massive covert operation to aid the Afghan
guerrillas. BCCI, with its close ties to Washington, Riyadh, and Islam¬
abad, was deeply involved.

After the fall of the shah and the invasion of Afghanistan, Saudi
Arabia and its neighbors sought foreign friends with greater urgency
than ever before. The al-Sauds and their counterparts in the UAE,
Kuwait, Bahrain, and other rich Gulf states used every means at their
disposal to ensure political and military support from the West, includ¬
ing access to sophisticated weapons. The principal source of such aid,
of course, was the United States.

Pakistan, which shares a long border with Afghanistan, sought
financial aid from the Arab countries to cope with the new Soviet
threat. General Zia immediately flew to Saudi Arabia to request aid.
He also turned to the United States.

Washington had suspended aid to Islamabad in early 1979 partly
because of the nuclear weapons program. After the Soviet invasion of
Afghanistan, Carter turned the spigot back on. The Reagan adminis¬
tration was much more generous, seeing a chance to fight the Soviet
“evil empire” by aiding Pakistan as well as the mujaheddin rebels in
Afghanistan. Much of the aid to the Afghans was channeled through
the Zia regime. In addition, Pakistan itself became a favored recipient
of U.S. assistance in the 1980s (surpassed only by Israel and Egypt).
Between 1981 and 1986, the United States gave $3.2 billion to Paki¬
stan.

Abedi would often boast to General Zia of his role, and that of his
bank, in ensuring this continued flow of funds, according to a former
associate. “Many times when the aid package was approved in the
Congress, Abedi would take credit with General Zia,” said this source,
who added that the BCCI chief helped the Pakistani foreign minister
arrange meetings with U.S. officials.

Together with the Pakistani government, the CIA embarked on a
campaign to aid the Afghan rebels. It was in this operation that BCCI
clearly emerged as a U.S. intelligence asset.

The CIA’s support of the Afghan resistance received far less attention
than a similar operation in Central America — where the United States
backed the contra rebels against Nicaragua’s leftist government — in
large part because there was little congressional or public opposition.
The Afghan rebels, however, received far more money than the con-

Covert Operations ( 133

tras — more than $2 billion. This operation has been described as
America’s biggest covert action program since World War II.

The war in Afghanistan led to an extraordinary ten-year partnership
between the Pakistani military, its intelligence agency (the ISI), the
Saudi intelligence agency, and the CIA. Zia built the ISI into his chosen
covert operations unit. Working with the ISI, Prince Turki bin Faisal,
the Saudi intelligence chief (and a BCCI shareholder), distributed more
than $1 billion in cash to Afghan guerrillas during the late 1980s.

Abedi and several of his close associates were conduits for informa¬
tion and intelligence. In addition, BCCI handled transfers of funds
through its Pakistani branches and acted as a collection agency for war
materiel and even for the mujaheddins’ pack animals, according to
internal documents. BCCI was also extremely useful when the CIA,
the National Security Council (NSC), or other agencies wanted to
supply arms discreetly to allies like the mujaheddin.

The Afghan operation was so extensive that the CIA station in
Islamabad “was one of the biggest in the world,” according to Bob
Woodward of the Washington Post; he added that the CIA’s William
Casey “had the closest relationship with Zia of any member of the
Reagan Administration.” Casey also became close to one of Zia’s top
advisers, Agha Hasan Abedi.

Abedi helped arrange Casey’s sojourns in Islamabad and met with
the CIA director during visits to Washington, according to former
BCCI officials and sources in Washington. Typically, Abedi would stay
at a luxury hotel and Casey would go to his suite. The two men, who
met intermittently over a three-year period, would spend hours talking
about the war in Afghanistan, the Iran-contra arms trades, Pakistani
politics, and the situation in the Persian Gulf.*

Casey was quick to realize that Abedi and his network could be
useful to U.S. intelligence around the world, whereas men like Adham
and Prince Turki were primarily of value in the Middle East. “What

*The CIA has said it has no record of contact between Casey and Abedi and has denied
that the two men ever met. Although that might sound like a sweeping denial, in the
looking-glass world of espionage it could mean something else. Staff members of Senator
Kerry’s have pointed out that Casey’s meetings with Abedi could have occurred “outside
[the CIA’s] record keeping and operations.” They note that the CIA’s legal department
always maintained that it had no record of Casey’s involvement in the Iran-contra affair
even though the director was a major figure in the scandal. In Iran-contra, the agency
explained, he was acting not as the CIA’s director but as an adviser to President Reagan.
Thus, Casey’s relationship with Abedi may well have been handled in such a way that it
was “undocumented, fully deniable, and effectively irretrievable.”

FALSE PROFITS

134 )

Abedi had in his hand [was] magic — something Kamal Adham or
even Prince Turki didn’t have,” said a former BCCI official. “Abedi
had branches and banks in at least fifty Third World countries. The
BCCI people in all these countries were on a first-name basis with the
prime ministers, the presidents, the finance ministers, the elite in these
countries — and their wives and mistresses.” Casey could ask Abedi
whether a country’s leader had “a girlfriend or a foreign currency
account,” the BCCI official continued. “Abedi could say: ‘We’ll tell
you how much he’s salted abroad and how much money he gives to his
girlfriend.’ ”

The BCCI network was also valuable as a mechanism for exerting
influence abroad, thanks to the political connections Abedi and his
minions had made over the years. The bank’s network could also serve
as a discreet channel for financial operations, including bribes, money
laundering, and the financing of arms deals. As Abedi’s relationship
with Casey blossomed, BCCI became increasingly important to the
CIA. The agency opened several accounts at BCCI as well as at its
satellite in the capital, First American; the CIA used more than forty
accounts at First American for routine business.

Throughout his tenure at the CIA, Casey bristled at Congress’s
attempts to impose controls on covert operations. The arena of great¬
est contention was Central America. To the frustration of Casey and
other Reagan administration officials, Congress would approve aid to
the contras for a brief period, then deny it, then approve it again. In an
effort to circumvent Congress, Casey — together with NSC officials —
cooked up a secret plan that Oliver North, a Marine colonel and NSC
aide, later called “a neat idea.” BCCI was intimately involved.

The administration’s covert sales of arms to Iran created a political
uproar when they became public in 1986. Why had the United States
been supplying arms to its sworn enemy? And what were senior pres¬
idential advisers like Robert (“Bud”) McFarlane doing, making a se¬
cret trip to Tehran with a Bible and a cake as gifts for the reigning
mullahs?

The tale that unfolded in 1987, in the hearings held by the congres¬
sional Iran-Contra Committee, was worthy of the raciest fiction. Lead¬
ing officials in the Reagan administration — with the help of the
CIA — had secretly arranged sales of weapons to Iran. Some of the
profits from the arms sales were illegally diverted to the contras. Casey,
the Israeli government, and some of the firebrands in the NSC sue-

Covert Operations ( 135

ceeded in getting approval from President Reagan for these secret arms
shipments.

By 1985, Iran was struggling to maintain its war against Iraq. After
five years of fighting, hundreds of thousands of Iranian soldiers had
been killed or maimed by Iraq’s better-equipped army. The United
States and several other Western countries refused to supply materiel
to Iran, and it was plagued by a lack of spare parts, rockets, missiles,
and ammunition.

The U.S. government hoped to capitalize on this weakness and build
new bridges to Iran. The Reagan administration wanted the Iranians
to use their influence with terrorist groups to secure the release of
American hostages in Lebanon. Middlemen were required to carry out
the transactions, particularly to give the administration and the CIA
some cover and the prospect — especially for the president — of
“plausible deniability.” But the middlemen had to work many differ¬
ent sides of the fractured politics of the Middle East.

Adnan Khashoggi, the flamboyant Saudi arms merchant, had con¬
nections in Saudi Arabia and other Arab countries but could also deal
with Iranians and even the Israelis. He also got along well with Manu-
cher Ghorbanifar, the Iranian arms dealer at the heart of the scheme.
Both men smelled multibillion-dollar contracts just around the corner
once Iran’s trade with the United States got going again.

Khashoggi used BCCI to deposit money into North’s Enterprise, as
the covert slush fund was labeled by Arthur Liman, a lawyer for the
Iran-Contra Committee. Money from the Enterprise was then fun-
neled to the contras to circumvent the congressional ban on aid. Ghor¬
banifar also used BCCI to deposit millions of dollars. The arms trans¬
actions were profitable for the middlemen — and BCCI. As the
planning of the shipments gathered pace, Khashoggi drew a chart for
his colleagues showing how his company, Triad International Market¬
ing, would buy $10 million worth of arms for Iran and extract $11
million in return. This transaction, he told them, would happen four
times, creating a tidy profit of as much as $4 million, with BCCI
receiving a share.

It is unclear exactly how many arms deals Khashoggi carried out
with the help of BCCI. Some may have taken place outside the confines
of Iran-contra. But the Saudi middleman was a critical link in at least
four of the six Iran-contra transactions between August 1985 and
October 1986. These deals were certainly very profitable for Kha¬
shoggi, Ghorbanifar, and BCCI. Khashoggi and Ghorbanifar sold

FALSE PROFITS

1 3 6 )

TOW missiles costing $3,500 for $10,000, and Khashoggi, in at least
one case, made a profit of $2 million on the $10 million financing that
he arranged for just two months.

Nazir Chinoy, a senior BCCI official in Paris, has said that he
discussed the sale of U.S. arms to Iran through Israel with Khashoggi.
Chinoy testified to the Senate in 1992 that he met Khashoggi in either
late 1985 or 1986 to arrange these transactions. But it was the bank’s
Monte Carlo office, and perhaps later its Los Angeles office as well,
that apparently provided the bulk of the financing for Khashoggi’s
shipments.

BCCI’s manager in Monte Carlo, Muneer Kiran, a Frenchman of
Lebanese origin, called Chinoy in 1986 and set up a meeting in Paris,
saying it would involve a wealthy and well-connected Saudi business¬
man, Adnan Khashoggi. “Khashoggi was quite candid, open about it,”
Chinoy said. At this meeting, held at BCCI’s posh office on the
Champs-Elysees, Khashoggi asked for a $5 million loan that would be
used “to supply arms to Iran, American arms through Israel, and sold
to Iran.” Advising Chinoy that discretion was needed, Khashoggi also
indicated that he was working with “friends in the States, in Israel, and
Iran” and that those friends included people in the U.S. government.
Chinoy was leery, but Kiran had worked closely with Khashoggi,
secretly doing about eight or nine transactions involving $15 million
or $16 million that funded arms deals for Iran. And Kiran was pre¬
pared to lend a further $10 million. Chinoy said he was nervous about
such business and tried to stop Kiran — who ranked below him in the
bank’s hierarchy — from doing business with the Saudi. But Kha¬
shoggi had Kiran at his beck and call, having given him “a bribe of
$100,000,” according to Chinoy. Also, it seems that Chinoy got no
help from his superiors in London to restrain Kiran. (Kiran could not
be reached for comment.)

Ghorbanifar, who helped to arrange the Iran-contra deals, main¬
tained deposits of between $2 million and $2.5 million at BCCI’s
Monte Carlo branch, Kiran told Chinoy. When Chinoy said that Kiran
should tell Ghorbanifar to take his accounts elsewhere, Kiran refused,
saying that the Iranian arms merchant was in good standing with
French officials, who credited him with helping to liberate French
hostages in Lebanon. Thus, Kiran argued, Ghorbanifar’s accounts
would only help boost BCCI’s status with French officialdom.

Further confirming BCCI’s pivotal role in the arms sales, Albert
Hakim, who acted as Oliver North’s banker, testified before the Iran-

Covert Operations ( 137

Contra Committee that Khashoggi transferred a total of $20 million
from BCCI in 1986 to fund the operation. Intriguingly, Hakim also
referred to other arms-trafficking deals totaling millions of dollars
more that involved a party he simply called “IC” of Grand Cayman.
These deals, congressional investigators speculate, could well have
involved ICIC, BCCI’s Grand Cayman affiliate. Hakim was also a
customer of another BCCI-related institution: First American.

Beyond the Iran-contra arms trades, BCCI was an important part of
Iran’s efforts to obtain weaponry and materiel. BCCI had a natural
sympathy for the Iranian cause, for Abedi’s clique was mostly made up
of Shia Muslims; most Iranians are also Shi’ites.

BCCI was prepared to do business with the Iranian banks, most of
which were shunned by the major Western institutions after the Iran¬
ian revolution. BCCI was also willing to falsify documents and letters
of credit to disguise arms sales to Iran to get around the U.S. and other
Western embargoes. Through most of the Iran-Iraq war, BCCI’s head
office in London ran large accounts for Iran’s Bank Melli which were
used to pay for weapons, military supplies, pharmaceuticals, and other
needs. Bank Melli periodically replenished the accounts with payments
that were sometimes as large as $100 million, according to Arif
Durrani, a Pakistani arms dealer who used BCCI to finance the export
of weapons to Iran.

Another supplier financed by BCCI was Ben Banerjee, a British arms
merchant of Indian origin. According to BCCI documents, in Novem¬
ber 1985 the bank’s Park Lane branch in London financed more than
$11 million of goods sold by Banerjee and his company, B.R.&W.
Industries Ltd., of Olney in Buckinghamshire. The buyer was Iran’s
Sepah Pasdaran, or revolutionary guards. Most of the goods were
labeled lift trucks, but they were actually 1,250 TOW antitank mis¬
siles costing $7,500 each, manufactured in the United States in 1980
and 1981. The documents had to be falsified because of the arms
embargo.

BCCI also financed the sale of $ 1.8 6 million worth of Polish rockets,
launchers, missiles, and rifles that traveled with the TOW missiles to
Tehran via Dubai in the UAE. The Iranians were so eager for these
supplies that they refueled the airplane for free for the return journey
and agreed to pay within forty-eight hours of delivery. Bank Melli’s
London branch transmitted the promise to refuel the aircraft.

Countries such as Poland, India, Brazil, Argentina, North Korea,

FALSE PROFITS

138 )

and South Africa were among the most important arms suppliers to
Iran, according to people knowledgeable about the trade. And many
suppliers from these nations were paid through BCCI, according to
Durrani, with the bank generally disguising the nature of the goods in
an attempt to evade the arms embargoes. “You could get [BCCI of¬
ficers] to word things any way that you wanted,” said Durrani.

BCCI’s biggest borrower — the Gokal family’s Gulf Group —
helped Iran in several ways. Mustapha Gokal, who now runs a fi¬
nancial company in Tehran, was a financial adviser to the Ayatollah
Khomeini, according to a former BCCI official. The Gokals’ compa¬
nies were among the most important shippers and suppliers to Iran
during its war with Iraq, supplying mostly nonmilitary goods, includ¬
ing foodstuffs and pharmaceuticals, but also war materiel and military
clothing. A former manager of the Gokals’ Karachi office said, “We
did everything for Iran. Everything .”

Some arms merchants who used BCCI ran afoul of the law for
selling to Iran. From a federal prison in Bridgeport, Connecticut,
Durrani said that he used the bank to help finance his shipments of
Hawk missiles and other hardware to Tehran. BCCI records show that
its Los Angeles branch started financing his company in about 1984,
although these documents, understandably, make no mention of Iran
because of the U.S. embargo. When Durrani was arrested in 1986,
BCCI’s U.S. offices claimed ignorance. The bank’s lawyer maintained
in an internal memo that Durrani’s company “deals in spare aviation
parts sold to Argentina, Egypt, Pakistan etc.” The hapless arms
dealer — whose sister-in-law is related to some of Abedi’s clique —
was sentenced to ten years; he was scheduled to be released in the fall
of 1992.

While in prison, Durrani struggled hard to link his own arms sales to
the Iran-contra deals of the Reagan administration. He argued that he
was only one part of a much wider campaign by the administration
and the CIA to guarantee a stalemate in the Iran-Iraq war. Durrani
now claims, for example, that his money helped bankroll a $10 million
arms shipment arranged by Khashoggi through BCCI’s Los Angeles
office. The Los Angeles branch officer, Yacoub Wadawalla, said in
1991 that Durrani was indeed a valued client but declined to confirm
his claim about the $10 million.

It is increasingly evident that there was significant arms trafficking
to Tehran from the United States outside the Iran-contra transactions,
such as that carried on by Durrani. For the moment, however, it

Covert Operations ( 139

remains unclear how much of this was sponsored by the U.S. govern¬
ment.

BCCI had no qualms about helping both sides in the Iran-Iraq war.
The Iraqi dictator, Saddam Hussein, spent billions of dollars on arms
during the 1980s. BCCI was involved in several deals, although the
sums it lent were small in comparison with its substantial financing of
trade with Iran. Records from BCCI’s accountants at Price Waterhouse
show that the bank was owed about $13 million by the Iraqi govern¬
ment in 1988 and 1989. Most of this money financed public works
projects, including a major dam project, according to Durrani. Some
of the loan proceeds, according to U.S. investigators, were used for a
missile project.

Through its branch in Amman, Jordan, and its Swiss subsidiary,
BCCI also financed merchants who supplied Iraq with arms and
materiel. One of these, according to government investigators, was
Wafai Dajani, a BCCI customer in Amman. That branch happened to
be run by Fakhri Bilbeisi, whose brother Munther was also an arms
dealer financed by BCCI. Before getting into that business, Dajani
spent more than ten years in Saudi Arabia working for Ghaith Pha-
raon. Dajani has denied to U.S. investigators that he played an impor¬
tant role in supplying materiel to Iraq.

Iraq’s favorite financier in the West was Italy’s largest bank, the
government-owned Banca Nazionale del Lavoro (BNL). During the
late 1980s, BNL’s Atlanta branch arranged for more than $4 billion in
loans to Iraq, a staggering sum. As much as $1 billion of that money
was used to finance a network of dummy companies that secretly
acquired much of Iraq’s military high technology.

When BNL’s lending to Iraq was exposed by U.S. law enforcement
authorities in 1989, bank officials in Rome claimed that the Atlanta
branch manager, Christopher Drogoul, had orchestrated the entire
lending spree without the approval of his superiors. In fact, however,
further evidence has suggested that BNL executives were involved in
the scheme and that officials of the Reagan and Bush administrations
may have been aware of what was going on.

BCCI was involved in the BNL affair in a number of ways. Through
its offices in the Cayman Islands, Luxembourg, and Switzerland, BCCI
channeled kickbacks into bank accounts held for the Iraqi leadership.
The money came from a 15 percent commission on BNL-sponsored
loans transmitted through an account at a bank in Paris, Union de

FALSE PROFITS

140 )

Banques Arabes et Frangaises. BCCI and BNL also did a substantial
amount of foreign exchange and short-term deposit business, some of
it through BNL’s Atlanta branch. The Federal Reserve found that
BCCI was one of many banks that lent money to BNL/Atlanta to fund
it overnight; BCCI even took funds from its overseas branches so that
it could increase its overnight lending to BNL. Investigators have thus
speculated that there was “some larger arrangement between BNL and
BCCI executives under which BCCI agreed to place funds in the U.S.
for the specific purpose of lending them short-term to BNL.” BCCI’s
Italian affiliate, Italfinance, also used BNL’s treasury services for its
own business.

BCCI was not alone in helping both sides in the Iran-Iraq war — so
did the Reagan and Bush administrations. Most of the American aid to
Iraq was in the form of government-guaranteed loans from such
sources as the U.S. Export-Import Bank and the Department of Agri¬
culture. A large portion of BNL’s loans to Iraq was guaranteed by the
Agriculture Department’s Commodity Credit Corporation, which is
supposed to finance exports of American agricultural goods. Never¬
theless, some investigators suspect that money was diverted to the
purchase of arms. (Of course, the whole concept of nonmilitary aid to
such a militaristic state as Iraq is absurd, since it ignores the fact that
money is fungible: every dollar provided to Iraq to import American
food freed up one dollar to purchase arms.)

When BNL’s lending to Iraq was exposed in 1989, it was a major
political scandal in Italy, with front-page newspaper stories for months
on end, parliamentary inquiries, and so on. The cost to the Italian
taxpayer has been enormous. In its 1989 fiscal year, BNL reported a
loss of $400 million, largely because of the Iraqi lending debacle.

In the United States, however, relatively little attention was paid to
the affair for years, and the Bush administration certainly did not
publicize it. After all, American taxpayers were stuck, since the gov¬
ernment had guaranteed many of BNL’s loans to Baghdad. Over the
years, the Commodity Credit Corporation had guaranteed as much as
$1.9 billion of the loans; when the FBI raided BNL’s Atlanta branch in
August 1989, about $750 million of these debts were still outstanding.
More important, the weapons purchased by Saddam Hussein with
BNL funds were used in the Gulf War of 1991 against American troops
and their allies from Britain, France, Saudi Arabia, and other coun¬
tries. It was not until February 1991 that the Justice Department
secured the indictment of BNL’s Christopher Drogoul and other defen-

Covert Operations ( 141

dants — one and a half years after the FBI began investigating the case.
Through an odd coincidence, the indictment was announced just a few
days after the Gulf War ended.

Congressman Henry Gonzalez of Texas, the chairman of the House
Banking Committee, has been probing the BNL affair for years. He has
alleged that officials of the Reagan and Bush administrations allowed
Iraq to tap into U.S. government programs to finance its war machine.
Gonzalez has singled out two Bush administration officials for sup¬
porting Iraq: Lawrence S. Eagleburger, the deputy secretary of state
(and, since August 1992, the acting secretary), and Brent Scowcroft,
the national security adviser. Before joining the Bush administration,
both men had been employed by Kissinger Associates (Eagleburger as
president), the consulting firm run by the former secretary of state.
One client was BNL, and Scowcroft had been involved in advising the
bank. Kissinger had other ties to people and organizations who were
close to BCCI.

Kissinger’s most notable foreign policy achievement during his years in
the Nixon and Ford administrations was the U.S. rapprochement with
China after decades of mutual hostility. To pave the way for normal¬
ization of relations, Kissinger traveled secretly to Peking in 1971. He
received valuable assistance from the government of Pakistan, which
has long enjoyed a special relationship with China. Before the trip,
Kissinger sent diplomatic feelers to Peking through the Pakistani gov¬
ernment. Once he was in China, Pakistani officials helped him fool
journalists into thinking he was actually in Pakistan, recovering at a
government guest house from a sudden illness.

Two of the Pakistanis involved were M. M. Ahmed, a senior foreign
policy adviser to President Yahya Khan, and Sultan Mohammed Khan,
the foreign secretary. Both men worked for BCCI in the 1980s as
“consultants” to Abedi in the Washington, D.C., representative office.
Kissinger also had dealings with Kamal Adham when, in the early
1970s, Egypt’s Sadat used him as a “back channel” to send messages
to Kissinger.

After Jimmy Carter became president in 1977, Kissinger launched
his lucrative new career in the private sector as a consultant to multina¬
tional companies and banks. His clients have included American Ex¬
press, Coca-Cola, Anheuser-Busch, H. J. Heinz, Volvo, ARCO, Hunt
Oil, Chase Manhattan Bank, American International Group, and
Freeport McMoran. In exchange for their fees, some clients have been

FALSE PROFITS

I 4 2 )

able to gain access to some of the same foreign officials Kissinger dealt
with in government service.

Kissinger hired other former government officials to work for his
firm, including, as noted earlier, Brent Scowcroft and Lawrence Eagle-
burger. Scowcroft took time off to serve on a commission appointed by
President Reagan and chaired by former Senator John Tower of Texas
to investigate the Iran-contra affair. Much to the relief of George Bush,
Reagan’s vice president and heir apparent, the Tower Commission
cleared him of misconduct."' When he became president in 1989, he
nominated Tower to be secretary of defense (Tower failed to win
Senate confirmation) and appointed Scowcroft national security ad¬
viser.

Another member of Kissinger Associates is Alan Stoga, an interna¬
tional economist who used to work for A. Robert Abboud, a banker
with several links to the BCCI network. Abboud was the chairman of
First National Bank of Chicago from 1975 to 1980, a period when the
Chicago bank became the biggest single lender to Bert Lance, as noted
in Chapter 3. BCCI arranged for that loan to be repaid in early 1978.
Abboud then served as president of Occidental Petroleum, in which
Ghaith Pharaon was an important stockholder. Its chairman, Armand
Hammer, was a major investor in Financial General Bankshares. Ham¬
mer arranged the meeting in February 1978 at which Lance informed
FGB’s chairman and president that clients of BCCI controlled a large
block of the company’s stock. Later, Hammer tried to persuade FGB to
agree to the takeover.

In 1988, a group of investors led by Abboud took over an ailing
bank holding company in Houston called First City Bancorp of Texas;
Abboud became chairman, a post he held until he was ousted in March
1991. While in charge, he provided financing to a Swiss company run
by the Gokal family. Later, when BCCI ran into financial trouble and
began to pare its international network, Abboud discussed buying
some of its foreign offices, according to a former associate. Abboud
says he doesn’t recall the Gokal loan and denies discussing the pur¬
chase of BCCI’s offices.

One country where the interests of Kissinger, Abboud, and BCCI
intersected was Iraq. First City Bancorp was a lender to Iraq; more
important, Abboud chaired an organization called the U.S.-Iraq Busi¬
ness Forum, which promoted business dealings between the two coun-

*Bush has maintained that he was “excluded from key meetings” at which the Iranian
operation was discussed. In fact, he attended several such meetings.

Covert Operations ( 143

tries. Stoga, of Kissinger Associates, took part in some of its activities.
In June 1989, for example, he went to Baghdad as part of a Business
Forum delegation and advised Saddam Hussein on international bor¬
rowing.

Kissinger’s firm not only received consulting fees from BNL, Kissin¬
ger served as a member of the bank’s international advisory board. He
has striven mightily to distance himself from the BNL-Iraq scandal by
pointing out that he left the board in February 1991, around the time
of the indictment. Of course, this was long after the scandal exploded.
And Kissinger did not totally sever his ties to the Italian bank. In June
1991, he gave a speech to the advisory board.

BCCI did not limit itself to procuring conventional weapons for its
friends. There is mounting evidence that it was part of a scheme to
obtain nuclear arms.

America’s monopoly on nuclear weapons lasted only a few years
after World War II. Other countries became nuclear powers, including
the Soviet Union, Britain, France, and India. Pakistan’s leaders were
alarmed that this potent weapon was in the hands of India, their
archenemy, and they decided that Pakistan needed nuclear weapons
too. Another incentive was that the Muslim world lacked nuclear
arms, although Israel had them. Thus, if Pakistan succeeded in devel¬
oping a nuclear weapon, it would be the world’s first “Islamic bomb.”

Pakistan’s nuclear project began in the early 1970s, when Zulfikar
Ali Bhutto was in power. When his successor, General Zia, refused to
halt the program, the United States, cut off economic and military aid
in April 1979. But after the Soviet invasion of Afghanistan eight
months later, such petty concerns were brushed aside by big-power
politics.

BCCI soon became an instrument of the Zia regime, and there is
evidence that the bank became involved in the Islamic bomb project. In
the early 1980s, the late Anthony Mascarenhas, a journalist for the
Sunday Times of London, began to investigate BCCI, as noted in
Chapter 5. In the midst of his research, he was attacked by thugs and
severely beaten. He told a friend that he had found evidence that BCCI
was involved in procuring nuclear technology for Pakistan through a
Liechtenstein shell company and that Libya was somehow involved.

The struggle to procure nuclear technology was something of a
national obsession for Pakistan, involving many of its best-known
politicians, some of whom were closely associated with BCCI. In
1984, Dr. Abdul Qader Khan, the man in charge of Pakistan’s nuclear

FALSE PROFITS

I 44 )

enrichment program, attributed its recent progress to “the personal
interest and efforts” of President Zia, Finance Minister Ghulam Ishaq
Khan, and their friends. Ishaq Khan, who has been president of Paki¬
stan since 1988, spent years as the chairman of Abedi’s BCC Founda¬
tion.

There is more recent and tangible evidence of BCCI’s ties to this
program. In July 1991, a retired Pakistani brigadier general, Inam
ul-Haq, was arrested in Frankfurt, Germany, and the U.S. Justice
Department sought his extradition for his alleged part in a scheme to
smuggle metals out of North America for Pakistan’s nuclear program.
Investigators had also linked his procurement activities to BCCFs
operation in Canada. Police there had discovered documents allegedly
showing that ul-Haq had directed Arshad Pervez, a Canadian busi¬
nessman of Pakistani origin, to acquire metals essential to producing
nuclear weapons. Pervez was convicted in federal court in Philadelphia
in 1987 on charges that he filed false documents as part of an attempt
to export high-strength metal, so-called maraging 350 steel, used to
manufacture weapons-grade uranium. (His conviction was overturned
on appeal. In 1990, however, Pervez pleaded guilty in exchange for a
reduction in his sentence to the time he had already served.)

BCCI allegedly helped to bankroll that purchase. Its senior officer in
Canada, Omar Khan, said his bank was to have acted as the agent for
the transaction because the Pakistani bank designated to handle the
financing did not have a Canadian office.

Soon after news of ul-Haq’s arrest leaked out in August 1991, a
spokesman for Pakistan’s foreign office denied that the retired general
had any connection with the government, asserting that he was a
private businessman. Ul-Haq’s lawyer in Lahore said his client had
gone to Germany for a routine business meeting and denied that he
had anything to do with BCCI. In July 1992, however, ul-Haq was
convicted in federal court in Philadelphia of conspiring to export
maraging steel and beryllium. His lawyer filed an appeal in August.

Pakistan itself has denied being behind the scheme to buy the re¬
stricted materials and has often denied trying to build nuclear weap¬
ons. These denials are difficult to accept, however, since General Zia
openly admitted his country’s nuclear program. In an interview with
Time magazine in March 1987, he said, “Pakistan has the capability of
building the bomb. You can write today that Pakistan can build a
bomb whenever it wishes.”

Covert Operations ( 145

From the days of the Arab oil embargo, the Saudis and other Gulf
Arabs have railed at the Western media’s coverage of the Middle East,
and who can blame them? Western news organizations have often
stereotyped Arabs, portraying them in editorial cartoons as camel-
jockeys in headdresses malevolently withholding gasoline supplies
from the West. But the Arab world has likewise stereotyped the media
organizations of the West, convinced that the television and newspa¬
per newsrooms in Washington and New York are in the grip of Zion¬
ists. As a result, Arab governments have often tried to use their politi¬
cal and financial clout to influence coverage of the Middle East.

Well-connected public relations men were hired, costly advertising
supplements were placed in news magazines, reporters and editors
were wooed with gifts and junkets, and occasionally outright intimi¬
dation was employed. In one notorious incident, Saudi Arabia threat¬
ened Western governments with retaliation if TV stations dared to
broadcast Death of a Princess , a 1980 “docudrama” that depicted
the treatment of a Saudi woman caught cheating on her husband.
(She was publicly shot and her lover was beheaded in a car park in
Riyadh.)

Outright infiltration of the Western media has long been sus¬
pected — and occasionally proved. Britain’s TV-AM, the equivalent of
America’s Today show, was produced by a company chaired by Jona¬
than Aitken, a Conservative member of Parliament. In a parliamentary
disclosure statement, Aitken said he was a director of a company that
“receives payments from contracts with Saudi Arabian royal family
interests and government agencies.” One of King Fahd’s sons, Prince
Mohammed, became a secret investor in TV-AM in the early 1980s,
according to a report in London’s Independent newspaper.

In the United States, a group of BCCI insiders managed to develop
very close ties to the men in charge of one of the country’s most
important media conglomerates: Tele-Communications Inc. (TCI). Al¬
though it is not a household name like CBS or Time Warner, it is a vast
and powerful enterprise. TCI holds stakes in four of the largest cable
channels in the country. It serves one of every five American house¬
holds wired for cable TV. It also owns one of the country’s largest
chains of movie theaters. Through this long-secret relationship, the
Saudis have even brought themselves close to — perhaps directly
into — an ownership position in Ted Turner’s Cable News Network
(CNN). At the center of this scheme was a group of Saudi intelligence
operatives with intimate ties to both BCCI and the CIA.

FALSE PROFITS

146 )

TCI was founded and remains headed by the visionary Bob Mag-
ness, a stubby, rough-cut Oklahoman who likes to chomp cigars.
Beginning in 1956 with a grubstake raised from selling cattle, Magness
formed a small cable television company in Texas. Twelve years later,
he founded TCI. It eventually became the giant of the industry. With its
affiliated companies, Liberty Media Corporation and West Marc
Communications (also controlled by Magness and his close col¬
leagues), TCI operates cable television systems in forty-eight states and
has huge investments in microwave routes for transmitting pictures
and information round the country. It produces revenues of about $4
billion a year, generating a cash flow of $1.7 billion. It was estimated
in early 1992 that TCI would fetch as much as $15 billion in a take¬
over.

Magness’s protege Larry Romrell is a senior vice president of both
TCI and West Marc, which manages the microwave routes that carry
signals for cable television. Romrell, who was brought up in a church
orphanage, sees Magness as the father he never had, by some accounts.
He has spent his whole career working for Magness at TCI and its
related companies.

Among Romrell’s varied assignments on his way to his current post
was a stint in Saudi Arabia in the 1970s. There Romrell met an
American defense specialist named Kerry Fox, who was representing
Martin Marietta and Rockwell International. There is some specula¬
tion that Fox was a CIA asset. “Kerry Fox either is agency or is
connected to the agency,” said a former senior Treasury official who
dealt extensively with Saudi Arabia during his time in that department.
(Fox declined requests for interviews.)

One of the Saudis with whom Fox became acquainted was Abdul-
Raouf Khalil, who worked closely with Kamal Adham. Khalil’s back¬
ground in electronics and communications put him on the same tech¬
nological wavelength as Fox. Khalil was the owner of Saudi Security &
Technical Services Company, a firm founded in 1978 that advertises
itself as an insurance company but is believed to provide electronic and
computer equipment to the government of Saudi Arabia for its intelli¬
gence operations. (In 1991, when U.S. prosecutors needed to reach
Khalil, they found they could most easily contact him through the
offices of the CIA station chief in Saudi Arabia.)

In the summer of 1981, some years after Fox and Khalil became
acquainted, Khalil traveled to the cool mountains of Colorado. Fox
himself enjoyed going there in the summer, and this year his friend

Covert Operations ( 147

Romrell from TCI was also vacationing in the mountains. The three
men met, became friendly, and began doing real estate deals together.
Khalil decided to back three investments: in Rockwall, Texas; Vail,
Colorado; and New Smyrna Beach, Florida. Romrell and Fox man¬
aged the properties on Khalil’s behalf and could use them. They later
sold the house in Vail at a profit to Dr. Charles Howard of Houston
North West Medical Center, a longtime associate of Khalil’s. Fox also
held a power of attorney for Khalil to acquire property for him in
Florida.

By doing business with Khalil, Magness and Romrell came into
BCCI’s orbit. In the 1980s, the two men — apparently acting as nomi¬
nees for Khalil — borrowed millions of dollars through three accounts
at BCCI’s Cayman Islands bank to finance real estate investments in
Colorado and to cover interest costs associated with the borrowings,
according to a report compiled by British investigating lawyers.

Khalil, meanwhile, was setting up another venture in London: Cap-
corn Financial Services, a BCCI affiliate that would trade in commod¬
ity futures and options. Capcom was launched in 1984, and two years
later BCCI’s former treasury department chief, Syed Ziauddin Ali
Akbar, became the head of the firm. Tens of millions of dollars would
ultimately disappear from Capcom. Some of the evidence suggests that
that money was used by BCCI insiders and Saudi intelligence oper¬
atives to penetrate American communications companies.

In February 1984, Romrell wrote to Akbar expressing his willingness
to get involved in the new commodity trading firm. “Magness and 1
have discussed your proposal to invest in a U.S. brokerage firm in
Chicago or New York,” he wrote, “and to participate in the ownership
and operation to the mutual benefit of BCCI and ourselves.” Thus did
Magness and Romrell became stockholders in Capcom, which was
connected to BCCI in a multitude of ways.

Capcom got most of its business from BCCI, trading futures, op¬
tions, and foreign exchange with the bank. The head of the firm,
Akbar, was not only a BCCI alumnus, he was related by marriage to
Swaleh Naqvi. Capcom’s three biggest shareholders owned stock in
BCCI and First American: Kamal Adham, Sayed Jawhary (Adham’s
business manager), and, of course, Khalil. Capcom’s records later
showed that Adham owned 17 percent of Capcom, Jawhary 15 per¬
cent, and Khalil 30 percent, making him the biggest shareholder. An¬
other shareholder was an American named Robert E. Powell, a long-

FALSE PROFITS

148 )

time associate of Adham’s who ran an aircraft supply business in
Southeast Asia during the Vietnam War. Powell now spends much of
his time in Oman running Global Chemical Systems, a business that
was set up in Saudi Arabia by Adham.

Romrell purchased his Capcom shares mostly with money bor¬
rowed from BCCI; a note to Romrell’s file in November 1984 indicates
that BCCI lent him $75,000 to buy the stock. Magness and Romrell
later acquired stakes of 4 and 16 percent, respectively, in Capcom’s
commodities brokerage subsidiary in Chicago, according to company
documents.

The cable television tycoons were not only important stockholders
in Capcom, they held senior positions in the company. Romrell became
Capcom’s chairman; Magness sat on the board of directors. Even more
important, the two TCI executives also looked to BCCI for capital.

Romrell wrote to Akbar in November 1984 saying that Magness
had asked him “to determine whether there would be any interest on
the part of BCCI” in providing loans to TCI and an affiliate. TCI, he
explained, was “looking for around $200 million” and the affiliate
“approximately $50 million to construct a new microwave route.” He
added, “There may be an opportunity to put this deal together with
BCCI if you are interested.”

BCCI may have already been a significant shareholder in TCI, ac¬
cording to government investigators. Akbar seems to have been, and
he may have been fronting for BCCI or its Saudi backers. When
Western Tele-Communications (WTCI), the microwave subsidiary,
began trading independently on U.S. markets, Romrell discussed a
$100,000 credit line from BCCI to purchase shares in Akbar’s be¬
half — and an additional $100,000 credit line to purchase shares for
himself. The stock offering was a tremendous success, with the price of
the stock surging after the offering to the public — and with Romrell
and Akbar apparently sharing in the riches. Romrell has denied that
the investments went ahead.

These alleged stock purchases were apparently being made from
London, raising questions about whether the purchasers fully reported
the trading they had carried out; company directors are required to
report insider transactions to the SEC, and failure to do so is a serious
violation of U.S. securities law. Romrell even sent Akbar information
intended for distribution to TCI’s shareholders, suggesting that Akbar
or Capcom owned shares in the parent company.

The TCI executives discussed a bewildering range of prospective
investments with BCCI, including a proposal for a $90 million invest-

Covert Operations ( 149

ment in Houston North West Medical Center, with BCCI providing
half the funds, Magness and Romrell a quarter, and the center’s doc¬
tors the remaining quarter. Other proposed investments included a
$220,000 joint purchase of Stouffers Inn in Denver.

Their friends and associates also benefited. Romrell arranged for a
friend to borrow $525,000 from Capcom to invest in a land deal in
Phoenix, according to investigators. There was also contact with other
entities connected to BCCI; in April 1988 Romrell made plans with
Akbar to visit Independence Bank in Los Angeles, a BCCI satellite
owned by Ghaith Pharaon.

There was also a clear understanding that the American executives
would function as nominees for Khalil, Adham, Jawhary, and Akbar.
In a 1987 letter, Romrell wrote: “As far as I personally am concerned
... I have acted as nominee for one or more of the original sharehold¬
ers” — meaning the Saudi investors. What earthly reason would Cap-
corn or BCCI have to call on a couple of cable television executives to
function as “nominees” for them? Romrell answered the question
himself. At the time Capcom was active on the Chicago commodity
market, and the Chicago Board of Trade was beginning to look
askance at the company’s offshore shareholders. Romrell wrote a
letter explaining that he and Magness were all too happy to help
Capcom “meet the needs of the Chicago Board of Trade.” He added
that “it was understood by the reorganized shareholders that they
were nominees for the original shareholders.”

As nominees for BCCI and its backers, Magness and Romrell re¬
ceived substantial financial benefits from the bank — the ones that
BCCI commonly offered its nominees: no-risk loans secured by stock
purchased in their names or so-called subordinated loans of stock. If
the value of the stock fell, there would be no risk to Magness and
Romrell. But if it rose, they would benefit. In addition, their loans were
self-liquidating and would be paid off with funds paid into their loan
accounts from profits on their own “managed investment” accounts,
maintained by Capcom’s Akbar. Although it was circuitously trans¬
ported through shell companies in Panama and other far-flung money¬
laundering centers, this money, it would later turn out, came straight
out of Capcom’s coffers. BCCI was effectively giving Magness and
Romrell the stock they held in Capcom.

One strange Capcom venture was the Capital Fund, an open-end
investment fund established in the Cayman Islands in late 1985. Its
stated purpose was to buy stocks, bonds, metals, options, and com-

FALSE PROFITS

150 )

modities. Though it was dressed up to look like a third-party invest¬
ment fund, it was actually a vehicle controlled by Akbar. The share¬
holders in the $10 million fund included five members of the Adham
family, four members of the Jawhary family, and entities controlled by
Akbar. Together, the Akbar and Adham groups owned 90 percent of
the fund’s capital, but it was controlled primarily by Akbar — joined
by RomrelPs pal Kerry Fox, as fund manager. Through “matched” and
“back to back” transactions and “artificial profits,” an estimated $3.3
million was skimmed into the fund from at least seventeen accounts,
according to an investigator.

At the time, Fox was president of American Telecommunications
Corporation (ATC), a firm in Texas which counted Akbar as one of its
directors. ATC went on to buy stock in U.S. Telephone, a provider of
long-distance telephone lines on the West Coast. Fox tapped into his
friends at Capcom and BCC 1 to fund a series of acquisitions, including
the U.S. Telephone deal. In the fiscal year ending June 30,1989, ATC’s
net sales totaled $12.5 million, up from $5.5 million the previous year.

But ATC was suffering from serious cash flow problems, and Fox
turned to his friends for help. Writing to Akbar in May 1988, he asked
for “another emergency loan” of $250,000 for ATC, saying that he
had “nowhere else to turn” and that he faced “a near-term but critical
cash flow problem.” As for the longer term, Fox said he could proba¬
bly use financing of between $2 million and $3 million from Akbar.
Through two shell companies, Akbar even bought stock in ATC;
investigators have seen indications that Kamal Adham, through Fox,
also participated in grabbing a piece of the U.S. telecommunications
industry.

In 1988, Khalil suddenly pulled out of Capcom, selling his entire
stake to Akbar for £4 million (about $6.5 million) plus forgiveness of
a substantial debt. Khalil’s timing was impeccable; the U.S. govern¬
ment was investigating BCCI and Capcom at that time — raising the
possibility that Khalil was tipped off by some American friends, per¬
haps his contacts in the CIA. As one investigator put it, “They knew
the game was over, so they’re cleaning up Khalil’s act.”*

By that time, TCI and its affiliates already dominated the U.S. cable
industry. They owned large stakes in several of the leading cable chan¬
nels, including the Discovery Channel and the Black Entertainment

*In a lengthy statement, Khalil maintains that he was duped by Akbar and BCCI and
that they frequently used his name without his knowledge.

Covert Operations ( 151

Network, not to mention the franchise to provide programming to
millions of Americans. TCI would go on to acquire United Artists,
making it a leading exhibitor of movies in the United States.

TCPs sales had grown at an average of almost 40 percent a year, to
total more than $3 billion in 1989, up from only $181 million in 1981.
The TCI stock price catapulted from $1.53 a share in 1981 to $17.88
in 1989, offering investors great returns on their money and boosting
the fortunes of Magness and Romrell.

In late 1988, when BCCI and Capcom were charged with criminal
offenses, Magness and Romrell resigned from Capcom, but they con¬
tinued their contact with BCCI. They met with BCCI’s executives
in December 1990 to try to resolve the extensive real estate borrow¬
ings in which they were involved. But as of the summer of 1991,
nothing had happened as a result of this meeting, and BCCI still had as
much as $4 million in delinquent loans and overdue interest to these
accounts.

Magness told Senate investigators that he lost every penny of the
$90,000 he said he invested in Capcom and maintained that he was
offered no inducements by the company and transacted no business
with it. “I was just plain defrauded,” he wrote in May 1992. Romrell
told investigators that he was humiliated by his association with Cap¬
com and BCCI. TCI, for its part, denied that it was connected with
BCCI or Capcom.

The links that Capcom and BCCI forged with two of the country’s
most powerful cable television executives — and with Fox, a veteran
of the defense industry — certainly look like more than just mutual
interest in good business opportunities. Khalil and Adham — associ¬
ates of both Saudi intelligence and the CIA — and Akbar and their
allies at BCCI, certainly seemed to go out of their way to ingratiate
themselves with Magness and Romrell, providing the two executives
with juicy financial opportunities. Two of the most important men in
Saudi Arabia deliberately sought and built a long-term relationship
with TCI and its affiliates, a venture that clearly was becoming a major
force in programming and channeling information into American liv¬
ing rooms.

Just as Khalil, Adham, and BCCI provided vital capital to the men in
charge of TCI at a critical time in its development, TCI engineered the
rescue of Ted Turner’s cable television business. In the mid-1980s,
Turner was desperately short of capital and on the verge of bank¬
ruptcy. In 1987, TCI’s president, a Magness protege named John

FALSE PROFITS

152. )

Malone, orchestrated a $560 million rescue of Turner’s company. TCI
wound up as the owner of 25 percent of Turner Broadcasting System
and its main cable subsidiaries — including, of course, CNN, which
would soon become one of the most influential news outlets in the
world.

Were BCCI and its friends in Saudi intelligence behind the bailout of
Turner Broadcasting? If so, were they seeking to influence public opin¬
ion in the United States and the other countries where CNN operates?
It is also worth asking whether the CIA was aware of what was going
on. It is hard to imagine that America’s leading intelligence agency
would be oblivious of an investment in such a sensitive industry by
foreign intelligence operatives. It is more likely that the CIA simply
looked the other way because of its own cozy relationship with Adham
and company. After all, the CIA had done nothing to hinder the
takeover of First American.

Although Turner declines to comment, there is no denying that the
men in charge of TCI, the rescuer of his company, had intimate links
with BCCI. There were other intriguing relationships as well. Turner,
whose business is based in Atlanta, is very close to one of BCCI’s most
important American allies, Jimmy Carter. In 1986, Abedi, Carter, and
Turner all attended the conference in Peking held by BCCI’s South
magazine, according to a BCCI official.

CNN also had a questionable relationship with Robert Gray, the
lobbyist who served on the board of First American’s Washington
bank and who was close to the CIA. In the mid-1980s, Gray’s firm
arranged for CNN to broadcast programs on behalf of foreign clients,
and the network did not (as the law requires) warn its viewers that this
was anything other than the product of independent journalists. In
March 1985, for example, CNN broadcast an “exclusive interview”
with King Hassan II of Morocco which was essentially a video press
release: the Moroccan government was a client of Gray’s and the
interviewer worked for him, not CNN. After the Washington Post
reported the incident, a CNN official denied knowing that the material
had originated with Gray’s firm.

But this was not an isolated incident, according to Susan Trento, the
author of a book on Gray. CNN also had a secret arrangement to run
programs on behalf of another foreign client of Gray’s, the Japan
Center for Information and Cultural Affairs (JCIC), a government
agency. The JCIC paid fees to both CNN and Gray’s firm. “According
to Gray and Company executives,” writes Trento, “CNN was broad-

Covert Operations ( 153

casting pure propaganda, produced and paid for by a foreign country,
to unsuspecting Americans and reporting it to no one.”

The full story of BCCTs relationship with the intelligence agencies of
the Middle East and the West will probably never be known. But there
is little doubt that the CIA was intimately involved with BCCI, that it
knew about the bank’s illegal activities for years, and that it did little to
stop them.

One man who became aware of the BCCI-CIA relationship was
Norman Bailey, a senior member of President Reagan’s NSC staff.
Bailey has recalled that “very early on in 1981, after I joined the staff
at the National Security Council, I began to see the name of BCCI on a
number of different documents.” It became clear to him that the bank
was involved in a wide range of illegal activities, including “terrorist
activities, gun running, guerrilla movements, technology-transfer vio¬
lations, embargo-and-boycott violations, things of that kind.” The
CIA, according to Bailey, “used the BCCI for certain of its payments,
and obviously doing that would make them less than totally favorable
to blowing the BCCI cover.”

The CIA may have had another reason for turning a blind eye to the
activities of its Saudi friends. William Casey and other Reagan admin¬
istration officials frequently asked the Saudi government to provide
financial assistance for covert operations in Afghanistan and other
parts of the world. It was a convenient arrangement for both sides.
When the Saudis provided the funding, the administration was able to
bypass Congress. The Saudis benefited by earning goodwill from the
American officials who provided them with arms and military protec¬
tion.

But where did the Saudis get all this money? Until the early 1980s,
Saudi Arabia was flush with cash, but then oil prices dropped sharply,
causing the kingdom’s revenues to plummet. New sources of money
had to be found. It was precisely at this time that millions of dollars
were drained out of BCCI through accounts at Capcom that had been
opened in the names of Kamal Adham and Abdul-Raouf Khalil, both
of whom were associated with Saudi intelligence and the CIA. Over
the years, even more money would disappear from the coffers of BCCI
and other financial institutions connected to the Saudis. A number of
investigators strongly suspect that some of the stolen money was used
to fund covert operations sponsored by the U.S. government.

This theory is certainly consistent with what we know about Casey.

FALSE PROFITS

154 )

When Oliver North appeared before the Iran-Contra Committee, he
testified that Casey used to say he wanted to find a way to finance
covert operations without having to turn to Congress. Casey wanted
to create a “self-financing” entity that would be “independent of
appropriated monies.” It would be an “off-the-shelf, self-sustaining,
stand-alone entity that could perform certain activities on behalf of the
United States,” said North. “Some of those [operations] were to be
conducted jointly by other friendly intelligence services, but they
needed money.”

The Dirty Money
Machine

Agha Hasan Abedi spoke often about moral and spiritual
values, sounding more like a religious leader than a banker. In inter¬
views, speeches, and articles in BCCI’s staff magazine, he would ex¬
pound on subjects like love, hope, and tolerance. BCCI was not simply
a profitmaking enterprise, according to Abedi; it had a higher calling.
“We serve a purpose for society and humanity at large, absolutely
without any consideration or bias toward caste, creed, color, religion,
or race,” he once said. “This is the distinction between us and other
business institutions.” On another occasion he said, “Purity and chas¬
tity is the key to our management at BCCI.” Masihur Rahman, BCCI’s
longtime chief financial officer, recalls that Abedi would frequently
caution his lieutenants always to bear in mind “the moral balance
sheet” as well as “the material balance sheet.”

BCCI’s “moral dimension,” according to Abedi, was closely related
to its identity as a Third World bank. He and other officials portrayed
BCCI as an institution dedicated to the best interests of people in the
world’s poorest nations. This rhetoric struck a chord with many peo¬
ple in developing countries. Huge portions of the Middle East, Africa,
and Asia had been colonies until recently, and there was widespread
resentment of “First World” institutions. Most foreign banks that did
business in Africa and the Middle East were run by white men — many
of them from the former colonial powers of Britain and France. These
banks were widely regarded as exploitative, neoimperialistic institu¬
tions that sucked the wealth out of former colonies. BCCI, by contrast,
was run by dark-skinned people who had lived under colonialism and
who could be expected to have some sympathy for the problems of

( i55 )

FALSE PROFITS

156 )

developing countries. If anyone doubted BCCI’s commitment to mo¬
rality and Third World development, Abedi could point to the millions
of dollars the bank gave to such causes as the Third World Foundation,
the BCC Foundation in Pakistan, and Jimmy Carter’s Global 2000.
BCCI wasn’t merely a commercial bank, it was a philanthropy!

The beautiful rhetoric masked an ugly reality. BCCI did indeed
operate on a different moral plane from other banks — a much lower
one. Abedi was willing to do virtually anything to accumulate power
and wealth. Perhaps the most extreme example of his hypocrisy con¬
cerns the bank’s conduct in developing countries. Far from helping
these nations, BCCI exacerbated some of their most serious problems,
including poverty, repression, crime, and corruption.

Until the Pakistani civil war of 1971, the country was divided into two
pieces — West Pakistan and East Pakistan — separated by a thousand
miles of Indian territory. During the civil war, East Pakistan broke
away and became the new nation of Bangladesh. Ever since, Bang¬
ladesh has suffered from grinding poverty. On just about every indica¬
tor of underdevelopment, it ranks near the bottom, including per
capita income (about $150 per year) and infant mortality (13 of every
100 babies die before their first birthday).

One reason for Bangladesh’s poverty is overpopulation; it is one of
the most densely populated countries in the world. Natural disasters
have played a part: floods killed about a half-million people in 1975
and 130,000 in 1991. The country has also suffered from terrible
misrule. The longest-serving autocrat was Lieutenant General Hussain
Mohammed Ershad, who came to power in a 1982 military coup and
ruled until a popular uprising forced him to resign in December 1990.
(An elected government took office early the following year.)

Ershad’s reign was characterized by political repression and appall¬
ing corruption. While people starved, Ershad enjoyed a life of luxury.
According to one report, when Bangladeshi police raided his home,
“they found among other items $500,000 in cash hidden in trunks, 40
bottles of Chanel cologne for men, 134 neckties, 62 bottles of Scotch
whisky, golf clubs, a big-screen television and a silver tea set studded
with emeralds.” The new civilian government believed that Ershad
and his associates accumulated several hundred million dollars by
demanding kickbacks from businessmen and by diverting funds from
foreign aid programs.

In the plundering of his country, Ershad received a great deal of

The Dirty Money Machine ( 157

assistance from BCCI, according to Bangladeshi authorities. BCCI,
they say, helped him stash huge sums of money in foreign dummy
companies and secret bank accounts. “This bank, this BCCI, was a
smuggler’s paradise,” said Attorney General Aminul Haq. “They were
the bankers of all the smugglers and the corrupt people here. ... Of
course they helped ruin us.”

General Ershad has been labeled a strongman, autocrat, and despot,
but a more fitting term is “kleptocrat.” Under Ershad, Bangladesh was
a kleptocracy — a regime whose principal purpose was to enrich the
ruler.

Kleptocracy has flourished in the Third World during the last few
decades, partly because of huge new flows of funds. The 1973 oil
shock created overnight millionaires and billionaires in such countries
as Saudi Arabia, Iran, Kuwait, and the UAE. In each of these states, a
large portion of the revenue was skimmed off by members of the ruling
families. In addition, politically connected middlemen fattened their
bank accounts by taking “commissions” from foreign companies.
These practices were not confined to the Middle East; graft was ram¬
pant in oil-producing states elsewhere in the world, including Mexico,
Indonesia, Nigeria, and Venezuela.

The Third World lending boom that followed the oil shock created
more opportunities for corruption. Between 1972 and 1982, the for¬
eign debts of developing countries soared from $300 billion to $750
billion. Much of the money was used for grandiose projects whose
main purpose was to enable government officials to enrich themselves
through kickbacks.

The drug trade has also stimulated corruption in parts of Asia and
Latin America, with traffickers buying immunity with bribes. In one of
the most brazen examples, military men backed by Bolivia’s cocaine
kingpins actually seized control of the government in 1980 in what
became known as the “cocaine coup.”

Corruption has been a major scourge in the Third World, contribut¬
ing to political upheavals, economic dislocation, and crime. For BCCI,
it was a business opportunity, since kleptocrats were a huge potential
source of deposits. BCCI was not the only international bank that
collected money from corrupt politicians, to be sure. But it stands out
because of the number of kleptocrats on its client list, including Ferdi¬
nand Marcos of the Philippines, Saddam Hussein of Iraq, Manuel
Antonio Noriega of Panama, Samuel Doe of Liberia, and a vast num¬
ber of Persian Gulf oil sheikhs. BCCI also stands out because of the

FALSE PROFITS

I 5 8 )

intimate relationships it enjoyed with many of these officials. In some
cases, BCCI helped officials enrich themselves in the first place by
paying bribes and participating in frauds. In so doing, it became a chief
accomplice in the looting of the Third World.

Abedi began collecting money from a Third World despot long before
BCCI was even founded. In the 1960s, he persuaded Sheikh Zayed to
deposit some of his wealth in United Bank, the Pakistani bank Abedi
headed. When BCCI was founded in 1972, Zayed became the bank’s
most important backer and its biggest depositor. Abedi also helped to
manage the ruler’s wealth.

Several Arab middlemen who profited from their political connec¬
tions had close ties to BCCI, as we have seen, including Kamal Adham,
Ghaith Pharaon, and Adnan Khashoggi. In non-Arab Iran, where the
shah accumulated a huge fortune after the oil shock, a brother of the
ruler held stock in BCCI.

The fall of the Iranian monarch in 1979 turned out to be a boon for
BCCI. It led to the so-called second oil shock — a new surge in petro¬
leum prices — which added to the wealth of Sheikh Zayed and other
BCCI customers. They would deposit much of this money in BCCI. It
also touched off a flight of capital from the Middle East, with some of
the money flowing to BCCI branches outside the region. When war
broke out between Iran and Iraq in 1980, BCCI cashed in by financing
arms deals for both sides, as we have seen. BCCI also collected loot
from Iraq’s ruler, Saddam Hussein.

Not long after the Iran-Iraq war ended in 1988, Saddam turned
against a “brother” Arab state that had been one of his biggest fi¬
nancial backers: in August 1990, thousands of Iraqi troops poured
into Kuwait. During the occupation, they carted off a staggering
amount of booty, including furniture, hospital equipment, and valu¬
able artworks. They were not warriors but plunderers. The Kuwaiti
authorities suspected that much of this wealth went to the family of
Saddam Hussein.

In early 1991, Saddam’s forces were expelled from Kuwait by for¬
eign military forces led by the United States. Kuwait hired Kroll Asso¬
ciates, a private investigative firm in New York, to hunt for the con¬
cealed foreign assets of the Iraqi regime and Saddam’s family. Kroll’s
operatives soon found evidence that Saddam had hidden huge sums of
money abroad, both to enrich himself and to enable his country to
evade international sanctions. The investigators believed that Sad-

The Dirty Money Machine ( 159

dam’s family had accumulated between $10 billion and $15 billion in
liquid assets abroad. Much of it was held in accounts at more than
forty foreign banks, according to the investigation, and some of the
biggest deposits were in BCCI. Jules Kroll, the head of the firm, called
BCCI “one of the more prominent banks in handling Iraqi money.”

While Saddam Hussein was battling Iran, another despot close to
BCCI was consolidating his grip on power in Pakistan. General Mo¬
hammed Zia-ul-Haq, who seized power in 1977, was an austere and
remote figure, a person who commanded respect and fear but not
affection. In official photographs, he looked something like a British
military commander of World War I vintage, with a center part in his
slicked-down hair and a clipped regimental mustache. Religion had as
much to do with Zia’s style as his military background. He was a
devout Muslim with puritanical instincts, and he tried to impose con¬
servative Islamic norms on his countrymen.

Zia’s image contrasted sharply with the corruption that flourished in
his regime. During the 1980s, large numbers of government officials
and military men became millionaires by stealing American aid dollars
and taking bribes from drug traffickers. Pakistan’s Inter-Services Intel¬
ligence agency (ISI), which acted as a conduit for American aid to the
Afghan rebels, was riddled with corruption. For example, a former
BCCI official with high-level connections to the Pakistani government
recalls that some of the American aid money was used to pay for
heavy-duty trucks to transport weapons to the mujaheddin. “Half the
trucks never got there,” says this source. “A hell of a lot went to Iran
for cash.”

The war in Afghanistan coincided with an upsurge in drug traf¬
ficking in Pakistan. Parts of Pakistan, Afghanistan, and Iran comprise
the so-called Golden Crescent, the world’s second-ranking opium-pro¬
ducing region (after Southeast Asia’s Golden Triangle). Before 1979,
Pakistan was not a major exporter of drugs. After the Iranian revolu¬
tion that year, the Khomeini regime cracked down on the opium trade,
and Iran was quickly overtaken in importance by the other Golden
Crescent countries. In 1984, it was estimated that 80 percent of all the
heroin consumed in Britain and 30 percent of American imports came
from Pakistan. In 1988, the State Department estimated that Pakistan
produced up to 9 percent of the world’s opium, adding that it was also
the main transit country for opium from Afghanistan, the world’s
second-largest producer (after Burma). The amounts of money in-

FALSE PROFITS

160 )

volved were staggering. In the late 1980s, Pakistan’s drug revenues
were estimated at between $8 billion and $10 billion, equivalent to one
quarter of the country’s gross domestic product.

The drug trade was closely connected with the Afghan war. Some of
the rebel groups supported themselves by selling opium, and a number
of Pakistani officials who worked with them provided protection to
drug traffickers in exchange for payoffs. BCCI, with its intimate links
to Pakistani officialdom, was ideally placed to handle their loot. Refer¬
ring to stolen aid dollars, a former BCCI official says, “A lot of this
money was being funneled by these generals into BCCI.” Abedi’s bank
also laundered money from the drug trade. One of the most popular
laundering centers was the UAE, where BCCI was the dominant for¬
eign bank.

One high-ranking official involved with the Afghan resistance
and — allegedly — the drug trade was Lieutenant General Fazle Haq
(sometimes spelled Huq), who served as military governor of the
Northwest Frontier Province, which borders Afghanistan. According
to Alfred McCoy, an authority on the heroin trade, mujaheddin rebels
“brought the opium across the border [and then] sold it to Pakistani
heroin refiners who operated under the protection of General Fazle
Huq.” Many Pakistanis referred to Haq as “our own Noriega,” ac¬
cording to Lawrence Lifschultz, a former correspondent in Pakistan
for the Far Eastern Economic Review who has done extensive research
on the Golden Crescent drug trade. The general, of course, denied any
wrongdoing, but he also boasted that he was so close to President Zia
that he “could get away with blue murder.”

Fazle Haq was also close to Abedi. Both were key advisers to Zia,
notes a former BCCI official, and the three men met frequently. “When
Abedi would have dinner with Zia,” says this source, “Fazle Haq was
[often] there.”

After Zia’s death in 1988, Benazir Bhutto — the daughter of the
man Zia had overthrown and executed — became prime minister in a
free election. Unlike Zia, she took a tough line against drug traffickers.
“When Zia went down,” says Lifschultz, “many of the top people in
the ‘heroin circle’ went down.” In 1989, for example, Pakistani au¬
thorities arrested an air force officer with ties to General Zia on
charges of smuggling heroin. He was suspected of laundering drug
money with the help of a BCCI officer in Dubai, the second most
important sheikdom in the UAF.

Benazir Bhutto was forced out of office in August 1990 by President

( i6i

The Dirty Money Machine

Ghulam Ishaq Khan, a high-ranking official in the Zia regime and an
associate of Abedi’s. (As noted above, Ishaq Khan had been chairman
of Abedi’s BCC Foundation.) In Bhutto’s place, the president installed
Nawaz Sharif, who also had ties to BCCI. In the 1970s, Sharif’s family
had launched a steel plant in the UAE with substantial financial back¬
ing from BCCI, according to a former associate. “BCCI,” said Benazir
Bhutto, “has connections to all the Zia cronies who ousted my govern¬
ment.”

Haq, the reputed Noriega of Pakistan, was never prosecuted on
drug charges. He was, however, arrested for the 1988 murder of a
prominent Shi’ite cleric named Arif Husseini but was later released. In
October 1991, Haq was assassinated in what was thought to be re¬
venge for Husseini’s death. He was hailed by Prime Minister Sharif as
“a great soldier and a competent administrator who played a com¬
mendable role in national progress.” With the death of Fazle Haq, the
prime minister said, “the nation has lost a true patriot.”

Nigeria, where BCCI had one of its largest operations, is by far the
biggest country in black Africa, with about 100 million people. It is
also endowed with vast petroleum reserves, making it one of the
world’s leading oil exporters. One other fact should be added to the
list: corruption pervades Nigerian society. In a discussion of bribery, a
senior government official once said, “The evil exists in every facet of
society. You bribe to get your child into school; you pay to secure a job
and also continue to pay in some cases to retain it; you pay 10 percent
of any contract obtained; you dash [bribe] the tax officer to avoid
paying taxes; you pay a hospital doctor or nurse to get proper atten¬
tion; you pay the policeman to evade arrest. This catalogue of shame
can continue without end.”

The scale of the corruption grew enormously after the oil shocks of
the 1970s. Officials not only took kickbacks from foreign oil compa¬
nies, they sometimes stole the oil itself. Nigerian crude would be
loaded onto tankers with no bill of lading issued, making it possible to
sell the cargo abroad and pocket the entire proceeds. According to one
estimate, 20 percent of the country’s oil revenues from 1979 to 1983
were diverted through smuggling and fraud. (Some of the oil was
smuggled to South Africa, in spite of Nigeria’s role as a prominent
critic of apartheid.) In 1983 alone, according to the former oil minister
Tam David-West, $1 billion worth of petroleum was stolen.

This oil wealth enabled Nigeria to borrow heavily from foreign

161 )

FALSE PROFITS

banks and from such “official” sources as export credit agencies.
Between 1979 and 1983, its foreign debt soared from about $2 billion
to more than $14 billion. Much of this money was squandered on
white elephant projects and stolen by corrupt officials and their cro¬
nies. Nigeria, in short, seemed to be a country made for BCCI.

BCCI arrived in 1979 with a 40 percent-owned subsidiary called
Bank of Credit and Commerce International (Nigeria) Limited. (For¬
eigners were forbidden to own more than 40 percent of a Nigerian
bank.) The rest of the stock was held by local investors, including
Ibrahim Dasuki, a wealthy businessman from the state of Sokoto who
was also chairman of the bank. He was very close to General Ibrahim
Babangida, who seized power in August 1985 in a coup d’etat and
then became president. Dasuki was frequently described as the presi¬
dent’s “political godfather.” His son Sambo served for a time as Gen¬
eral Babangida’s aide-de-camp.

One important indication of Dasuki’s stature with the regime is an
incident that occurred in 1988. On November 1 of that year, the sultan
of Sokoto — the spiritual leader of Nigeria’s large Muslim commu¬
nity — died. Two days later, it was announced that Muhammadu
Maccido, his son, would succeed him. Although the choice was widely
supported within the Muslim community, the government reversed the
decision and named Dasuki as the new sultan. The decision touched
off two days of riots in Sokoto, in which at least ten people died.
Protesters also set fire to a building owned by Dasuki which happened
to house a BCCI branch.

Most foreign banks found the Nigerian market disappointing be¬
cause they had problems getting permission to convert profits from
naira — the local currency — to hard currency and remit the money to
their head offices. “You can make a lot of money,” said a European
banker, “but if you cannot get it out there is no point.” Another
problem affecting several foreign banks concerned technical service
agreements (TSAs). When a TSA had been signed, the Nigerian subsid¬
iary was supposed to be able to remit hard currency to the parent bank
to pay for various services — auditing, computer work, and so on. If
the Nigerian authorities blocked TSA payments — which was often
the case — foreign banks could lose a great deal of money. Because of
these and other problems, a number of international banks pulled out
of Nigeria while others reduced their stakes in local banks.

At the same time, however, BCCI was expanding. “They were open¬
ing branches everyplace,” said a French banker. By the end of 1987,
BCCI had thirty-three branches in Nigeria, more than in any other

The Dirty Money Machine ( 163

country except Britain and Oman (where it operated a joint venture
bank called the National Bank of Oman). Its total assets had reached
$584 million.

Officials at other international banks could not explain why BCCI
was just about the only foreign bank flourishing in Nigeria, but they
did have some theories. It was widely suspected that BCCI’s political
connections helped it to obtain permission to move money out of the
country. The main secret of BCCPs success was exposed in 1991: for
years, the bank made huge profits illegally by converting naira to
dollars and channeling the money abroad. Between 1985 and 1987,
the illegal profits totaled between $150 million and $200 million. The
fraud was believed to have started as early as 1982.

While BCCI — as an institution — was defrauding Nigeria, several
employees ran their own free-lance scams, taking kickbacks from
borrowers or engaging in black market currency dealings. “I had
people working for me — Pakistani employees — who were rich,”
recalls a former executive of BCCI who was based in Europe. “They
had made personal wealth in Nigeria.” In fact, while officials at other
foreign banks regarded Nigeria as a hardship post, many BCCI of¬
ficials pleaded for a chance to work there. Abedi was not at all dis¬
turbed that his employees were lining their pockets this way, according
to another BCCI veteran. When Abedi was told that an employee was
taking kickbacks, “he would say, ‘If you can’t make money for your¬
self, how can you make money for the bank?’ It was encouraged by
senior management.”

Attock Oil, a BCCI satellite in London, enjoyed such cozy relations
with the Nigerian National Petroleum Corporation (NNPC) that it
made profits there when it was losing money everywhere else in
the world according to a former employee. The reason was that
NNPC officials awarded sweetheart contracts to Attock, this source
explained in 1990. There was one particular deal, he said, in which
Attock purchased Arab light crude from Saudi Arabia and provided
it to the NNPC’s Kaduna refinery to be turned into lubricant. (Ni¬
gerian crude was not suitable for lubricant.) In return, Attock re¬
ceived Nigerian crude from the state oil company. One reason the deal
was peculiar, said this source, was that there was no reason for Attock
to serve as a middleman. “Why doesn’t NNPC go direct to the Saudis
and buy the Arab light?” he asked. Even more suspicious, he said, is
that the deal was structured in such a way that Attock was virtually
guaranteed a profit: “You’d have to be totally inept not to make
money.”

FALSE PROFITS

164 )

After the oil glut of the early 1980s, Nigeria’s financial condition
deteriorated rapidly. The country was eventually forced to reschedule
its debts and turn to the International Monetary Fund (IMF) for
assistance. The IMF insisted on various financial reforms, but Nigeria
resisted. Partly to circumvent the IMF, Nigeria turned to countertrade:
swapping oil for merchandise or loans.

One major barter agreement involved BCC 1 and Attock Oil. It was
signed on November 29, 1985 — just three months after President
Babangida seized power — by Tam David-West, then Nigeria’s oil
minister; Allauddin Shaik, the general manager of BCCI’s central mar¬
keting division; and M. A. Baqi, the managing director of Attock
Oil. It was a $1.25 billion loan, with principal and interest payments
to be made in oil. As much as $250 million of the loan was used.
Unlike most major financings, the terms and conditions were never
announced. The deal was not even disclosed to Nigeria’s other foreign
creditors, many of whom had trouble collecting interest on their old
loans. Nigeria’s use of barter was widely attacked by economists for
being wasteful and fostering corruption, but that didn’t seem to faze
the country’s leaders. On the contrary, the opportunities for graft may
have been a major attraction.

No one knows how much money was stolen by Nigerian officials
and their associates in the 1970s and 1980s, but the amount is un¬
doubtedly in the billions, much of which was smuggled out of the
country and deposited in foreign bank accounts. The corruption led to
an orgy of spending, as Nigerians scooped up Rolls-Royces, private
jets, and country mansions in England. A real estate agent in London
said that in the early 1980s his agency was “selling anything up to
twenty properties a week to Nigerians.” One Nigerian official report¬
edly approached an insurance company to cover the contents of his
English vacation home. The company said it would be happy to
oblige — although it would have to exclude the solid gold bathtub he
had bought for $5 million. It was suggested that he leave the bathtub in
a bank. If the bathtub was stored in a London bank, there’s a good
chance it was BCCI, since Abedi’s institution was a favorite depository
for the Nigerian elite.

A former Senate investigator, Jack Blum, discovered this fact in
1988, when BCCI was the target of a U.S. government investigation.
When the probe was reported publicly, Blum received a telephone call
from a Nigerian diplomat in Washington who wanted to know if the
investigation was serious. When Blum asked why he was concerned,

The Dirty Money Machine ( 165

the diplomat explained that President Babangida had an account at
BCCI.

BCCI’s secret loan to Nigeria was just one of several examples of its
dubious deals with Third World governments. Another intriguing loan
was made to Suriname, a small country in South America known as
Dutch Guiana until its independence in 1975. At the time of the loan,
Suriname was ruled by a dictator named Desi Bouterse, whose human
rights abuses and corruption had turned the country into an interna¬
tional pariah. Under Bouterse, Suriname also became a haven for Latin
American cocaine smugglers.

BCCI was happy to do business with Bouterse, agreeing to a secret
$200 million loan in March 1986. The loan agreement suggests that it
was hardly a conventional deal. The money was to be lent by Camari
Corporation, a dummy company in the Netherlands Antilles, with the
proceeds to be deposited “in cash” in account 01007647 at BCCPs
Miami branch. According to the agreement, the money was to be
“used exclusively for social, economic and educational purposes.”
Some U.S. law enforcement authorities, however, suspected that the
loan was actually a scheme to launder drug money through BCCI.
When asked about the deal in 1991, Suriname’s central bank governor,
Henk Goedschalk, acknowledged signing the agreement but said the
deal had not gone forward.

Stranger than BCCI’s occasional loans to developing countries are
the deposits the bank received from Third World central banks and
governments. Central banks in particular usually deposit their coun¬
tries’ foreign exchange reserves in international banks with the highest
credit ratings. BCCI was just the sort of bank a prudent depositor
should have avoided. Not only was it weakly regulated, its main
holding company was incorporated in Luxembourg, a country with¬
out a central bank. This meant that BCCI had no “lender of last
resort” to help it out in the event of liquidity problems (temporary
shortages of cash). Since BCCI was privately held, it was not scruti¬
nized by stock market analysts. Finally, credit rating agencies like
Moody’s and Standard & Poor’s did not analyze the bank’s creditwor¬
thiness. Nevertheless, BCCI attracted deposits from governments or
government agencies in Barbados, Belize, Cameroon, Guatemala, Ja¬
maica, Nigeria, Paraguay, Peru, St. Kitts and Nevis (a small Caribbean
country), Trinidad, Venezuela, and Zimbabwe, according to internal
records. The records of BCCI’s Paris branch for 1984 show substantial

FALSE PROFITS

1 66 )

deposits from the central banks of Mauritania, Togo, and Tunisia.
Even after BCCI ran into deep trouble with U.S. law enforcement in
the late 1980s, many developing countries continued to do business
with it.

Some of the government deposits were linked to lending by BCCI.
Political connections also seem to have played a role. In Jordan, the
brother-in-law of its army commander went to work for BCCI. Soon
afterward, the bank reportedly took over the Jordanian army’s depos¬
its and banking business.

BCCI also paid bribes to get deposits and evade regulations. Abdur
Sakhia, a veteran BCCI official, described an incident at the 1985
annual meeting of the World Bank and the International Monetary
Fund in Seoul, Korea. “I saw one of the BCCI officers with a lot of
cash, handing [it] out to the staff of the Central Bank of Nigeria. This
is what I saw personally being given to them.” U.S. law enforcement
authorities say they have evidence that BCCI paid bribes to central
bankers or finance ministry officials in about a dozen developing coun¬
tries, including Argentina, Nigeria, Peru, Senegal, and the Sudan.

It is not only corrupt officials in the Third World who move their
money to foreign financial havens; so do ordinary people. Much of the
money borrowed by Third World countries during the 1970s and
1980s flowed right back out again in the form of capital flight. People
who feared political and economic instability accumulated dollars and
other hard currencies in foreign financial havens. The flight of capital
contributed to the financial woes of debtor nations: hard currency that
could have been used for economic development or to service foreign
debts was instead stashed abroad in private bank accounts, real estate,
and other investments. Capital flight was one of the principal causes of
the Third World debt crisis, which exploded in 1982 when such major
borrowers as Argentina, Brazil, and Mexico defaulted on their debts.

Because of the harmful effects of capital flight, most Third World
countries imposed foreign exchange controls, which restricted the abil¬
ity of residents to move money abroad. This did not prevent interna¬
tional banks from accepting such deposits, however. In fact, major
international banks that had been at the forefront of the Third World
lending boom — such as Citibank, Bank of America, and Chase Man¬
hattan in the United States as well as major European banks — also
collected huge amounts of flight capital. To deal with rich foreign
customers, the banks set up special “international private banking”

The Dirty Money Machine ( 167

departments in such financial centers as London, New York, Geneva,
and Hong Kong.

BCCI received a huge volume of petrodollar deposits after the 1973
oil shock, yet it was not a major lender to developing countries. Abedi
even boasted that BCCI made few loans to foreign governments (so-
called sovereign creditors). In a January 1983 interview with Institu¬
tional Investor , a financial magazine in New York, he said that “as a
matter of policy from the beginning, we have not gone for sovereign
risks.” This, of course, was an extraordinary statement in view of
BCCFs self-appointed role as a pillar of the Third World, yet Abedi
gave no indication that he saw the contradiction.

Although BCCI avoided lending to developing countries, it contrib¬
uted to the debt crisis by sucking billions of dollars of flight capital out
of Third World countries. Flight capital, in fact, was a cornerstone of
BCCFs business, helping to explain its phenomenal growth rate.

BCCI’s network was ideally placed to collect deposits from capital
exporters, with offices in dozens of developing countries as well as
virtually every major flight capital haven, including London, Luxem¬
bourg, Geneva, Zurich, Miami, Panama, and Hong Kong. BCCFs
brochures and advertisements were sprinkled with code words like
“confidentiality” and “privacy.” Potential customers were reminded
of the bank secrecy laws in countries like Luxembourg and Switzer¬
land. The bank also took advantage of the Third World origins of its
staff. In many African countries, for example, ethnic Indians are active
in retailing and import-export businesses. They tended to feel more
comfortable dealing with BCCI officers of similar background than
with European or American bankers.

BCCFs “personal service” also helped. Rich customers from Third
World countries were courted with the same techniques Abedi used to
make political connections — including gifts, limousines, and lavish
entertainment. A former BCCI official recalls that one of his colleagues
spent months courting a member of Saudi Arabia’s al-Ibrahim family,
who are related by marriage to the ruling al-Saud family. The banker’s
superiors told him to stick with the prospect, so he did nothing but
socialize with the businessman for months. “Come six months,” the
source recalls, “this man says, ‘I’ve brought in one of the biggest
deposits — a half-billion dollars.’ ”

BCCI enjoyed yet another advantage over most competitors: Abedi
and many of the people who worked for him had no qualms about
colluding with customers in illegal schemes to move capital abroad. In

168 )

FALSE PROFITS

at least a half-dozen developing countries, BCCI was formally charged
with violating foreign exchange controls: Mauritius (in 1983), the
Sudan (1985), India (1986), Kenya (1987), Colombia (1989), and
Brazil (1989). It was found guilty in India, Mauritius, and Colombia.
(There were also incidents of similar alleged foreign exchange abuses
by BCCI officers in Jamaica, Sierra Leone, and Liberia, according to
the former chief financial officer, Masihur Rahman.)

In Kenya, BCCI was charged with violating currency controls by
permitting a coffee exporter to accumulate abroad $34 million worth
of foreign exchange. The money should have been repatriated to Ken¬
ya. The bank’s foreign exchange license was suspended and three BCCI
officers were arrested: the general manager in Kenya, the credit man¬
ager, and the manager of the main Nairobi branch. BCCI eventually
reached a settlement with the Kenyan government in which it agreed to
turn over the $34 million to the government, and the charges were
dropped in February 1988.

In the Indian case, employees of BCCI’s Bombay branch were sus¬
pected of selling traveler’s checks to people who were not going
abroad. After an investigation, five BCCI employees were arrested and
then released on bail. After further investigations, four of the employ¬
ees were arrested again in January 1987 and released two weeks later
by an order of the High Court of Bombay. Later that year, the bank
was found guilty of violating India’s Foreign Exchange Regulations
Act and fined. The conviction was appealed, but the bank eventually
dropped the appeal. BCCI’s manager in India, Krishen Murari, disap¬
peared. He later surfaced in Britain.

Members of the Indian elite were among those suspected of using
BCCI’s facilities to move money out of the country. In late 1987, the
Indian government retained the Fairfax Group, an investigative firm in
Falls Church, Virginia, a suburb of Washington,"' to look into possible
violations of the country’s currency controls and bribery statutes. “We
were essentially hired to handle the foreign part of six or seven investi¬
gations already under way in the [Indian] finance ministry,” recalls
Mike Hershman, the president of the Fairfax Group. “It was thirty
days to forty-five days into our investigation that the links to BCCI
became apparent.” By tracing money that had been transferred abroad
in violation of foreign exchange controls, investigators discovered a

*The Fairfax Group was later retained by the Bangladesh government to investigate
General Ershad, the deposed dictator.

The Dirty Money Machine ( 169

slew of offshore companies. “Many of them,” Hershman said, “were
set up by BCCI.” These offshore companies and accounts were being
used by several leading Indian businessmen and aides to former prime
minister Rajiv Gandhi, who had together transferred “tens of millions
of dollars” into overseas companies, according to Hershman.

These cases were exceptional. In many countries, BCCI was able to
use its influence to avoid legal troubles. After all, the bank was bribing
central bank officials, who were responsible for enforcing exchange
controls. In several countries, the bank had cozy relationships with
higher-ranking officials: heads of government and heads of state.

BCCI’s role as a dirty money machine came naturally. The corporate
amorality is one explanation. In addition, the bank was perfectly
placed to service its unsavory clientele, thanks to its international
network. Also important was Abedi’s obsession with growth. For
Abedi to achieve his goal of building the world’s largest bank, he
would need tens of billions of dollars in fresh deposits, and he cared
nothing about their origin. Indeed, BCCI’s most unscrupulous bankers
were often the best marketers, since they did not hesitate to handle
dirty money.

One man who joined BCCI in the mid-1980s after a long career at a
major American bank says that Abedi and other top officials “put
tremendous pressure on people to bring in deposits — at any cost.”
Many employees succumbed to the pressure, says this source, because
they feared they would otherwise lose their jobs and would be unable
to find comparable work at other banks. “It was a twenty-four-hour-a-
day pressure,” he says, accompanied by “threats, especially to these
poor Pakistani bastards: ‘If you don’t bring in this money we’ll put you
on a plane.’ The guy is living in a million-dollar house [in the United
States] and the alternative is to go back to where they have no running
water. After leaving BCCI no one will touch you with a ten-foot
pole — especially those Pakistanis who had no professionalism. Their
whole life was BCCI.”

BCCI’s involvement with dirty money was by no means limited to
the Third World. Abedi’s boast that BCCI did not discriminate on the
basis of race, religion, or color was correct: he was happy to collect
money from criminals of any background. Nazir Chinoy, a senior
BCCI official who was convicted of laundering drug money, put it
simply in 1991: “One never gave much thought to the law. One only
thought about getting the deposits.” The bank was so effective in this
policy that it attracted tens of millions — perhaps hundreds of mil-

FALSE PROFITS

170 )

lions — of dollars in criminal money, including funds from drug traf¬
fickers, smugglers, and financial fraudsters. In some cases, BCCI of¬
ficers became so intimately involved with such customers that they
were full accomplices in the crimes.

Of the hundreds of international banks that have set up shop in
London, one of the most peculiar was Arab Overseas Bank and Trust
Company. For one thing, the name was misleading, since it was not
really a Middle Eastern institution; it was licensed in the Caribbean
country of Anguilla. For another, it was run not by Arabs but by an
American named Wallace C. Kemper, Jr., who had been born and
raised in Louisiana. Most important, it was not really a bank.

Arab Overseas was a shell bank, a totally unregulated institution
consisting of little more than a receptionist and a box of stationery.
During the 1980s, the Anguillan government made a fortune selling
bank licenses to foreigners with little regard for how the licenses would
be used. Kemper ran two Anguillan banks, Arab Overseas and an
equally phony institution called European Overseas Bank. Both
“banks” maintained illegal representative offices in London in a small
building at 28 Black Prince Road, a back street off the Albert Embank¬
ment. Kemper attracted deposits by promising total confidentiality to
customers. “No passports or references are required when you open
your account,” said one of his brochures. “You do not give your name.
You need not give your address.” What the brochure did not say was
that Kemper had no intention of allowing his anonymous depositors
to ever withdraw their money — at least, if he could get away with it.
For Kemper, the bank charters were a license to steal.

Another scam was the so-called advance fee fraud. Kemper told
would-be borrowers that he could arrange loans for them as long as
they gave him large fees in advance. The fees were paid, but the loans
did not materialize. The total take was in the millions of dollars.

The Anguillan government stripped Kemper’s banks of their licenses
in 1987, but the American continued to operate his illegal representa¬
tive office in London for several more months until the British police
caught up with him. In March 1988, a court in London sentenced
Kemper to three years in prison for fraud and six months for posses¬
sion of two forged passports. Around the same time, accomplices of
Kemper’s who had swindled several Americans pleaded guilty to fraud
charges in the United States. The British police found that Kemper had
maintained an account at a Croydon, England, branch of an authentic

The Dirty Money Machine ( 171

Arab bank: Bank of Credit and Commerce International. When the
police asked for Kemper’s bank records, BCCI refused to cooperate on
the ground of banking confidentiality.

In other advance fee cases, BCCI officials actually vouched for the
con men, making them accomplices in the frauds. One case involved
Morris J. Miller, a Florida man with several convictions on his record.
Immediately after his release from prison, prosecutors said, he set
himself up as a loan broker and collected fees and expenses across the
country. (Miller was convicted by a federal jury in Washington in
December 1988, but the conviction was reversed on a technicality; the
appeals court held that a defense witness was improperly prevented
from testifying.) Several of the people who dealt with Miller say they
were told that they could obtain financing from a bank licensed in
Montserrat, which was actually just a shell bank. The men who con¬
trolled the Montserrat “bank” reassured would-be borrowers by say¬
ing that they worked closely with a major international bank, BCCI.
The victims were told that they could check out the Montserrat bank
by contacting BCCI officers in New York or London.

A Florida businessman who owned a small computer company says
he was told by a BCCI officer in New York that BCCI was working
with the Montserrat bank and would be funding the deal. This man
wound up paying about $7,000 to Miller and more than $32,000 to
one of the. men connected with the Montserrat shell bank. “Two
members of my family lost their homes because they had to take out
second mortgages,” he says. The advance fee fraudsters, says this man,
“ruined my business and ruined my personal life.”

Financial fraudsters seem to favor sunny climates. Fort Lauder¬
dale — Morris Miller’s stomping ground — is infested with such
crooks. Another popular spot is Orange County, California, south of
Los Angeles. It has been the base for dozens of crooked investment
firms, known as boiler rooms, including First American Currency
(FAC), an outfit in Laguna Hills. The First American name had noth¬
ing to do with the Washington, D.C., banking company associated
with BCCI. The firm was connected to Abedi’s bank in another way:
the men who ran the California boiler room hid some of their loot in
BCCI.

Investors who fell for the pitch of FAC’s smooth-talking salesmen
were told they would be getting commodity futures contracts for
precious metals. But FAC was not licensed to trade in commodity
futures. What is worse, FAC’s operators pocketed the bulk of the

FALSE PROFITS

I 7 Z )

money. After nearly two years in business, FAC was raided in Decem¬
ber 1985 by federal law enforcement authorities and forced into re¬
ceivership. More than a thousand customers lost an estimated $16
million, according to investigators. About $3 million was traced to an
account at BCCI in Panama.

The money lost by FAC’s customers was pocket change compared
with the losses in boiler room scams run by other BCCI clients. In these
cases, the products were not precious metals but penny stocks, so
named because they often sell for less than a dollar per share. Some
penny stocks are legitimate, but many are grossly overpriced or worth¬
less. In fact, some of the companies that issue the stock are just empty
shells, set up by accomplices of the boiler room operators. During the
1980s, penny stock bandits collected huge sums of money in the
United States and other countries; in 1989, U.S. state securities regu¬
lators estimated that American investors lost at least $2 billion each
year.

Several of the most notorious penny stock crooks laundered their
loot through BCCI. The bank’s ties with some of them were so close
that BCCI’s officers must have known that the funds came from crimi¬
nal activity. The most prominent swindler was Thomas F. (“Tommy”)
Quinn, the mastermind of what may have been the biggest boiler room
fraud in history.

Tommy Quinn grew up in Brooklyn and attended college and law
school there at St. John’s University. After working as a criminal
lawyer (some of his clients were mobsters), he became a criminal
himself, specializing in stock market scams. As president of a small
New York brokerage firm, Quinn was involved in a scheme to pro¬
mote shares in a company whose assets, according to the Securities and
Exchange Commission, were “almost completely illusory.” In 1966,
the SEC barred him for life from the securities industry because of
“flagrant fraudulent practices.” Quinn landed in even deeper trouble
in 1970, when he was sentenced to six months in prison and disbarred
from the practice of law. He settled another fraud accusation by the
SEC in 1986 by agreeing to a permanent injunction, not to violate
securities laws.

That same year, Quinn left the United States and established a new
base on the French Riviera. Operating out of a $6.5 million villa in
Mougins, a town near Cannes, he set up a network of boiler rooms in
Europe and the Middle East, with offices or sales representatives in

The Dirty Money Machine ( 173

such countries as France, Switzerland, Germany, Spain, Sweden, Cy¬
prus, Gibraltar, Abu Dhabi, and Saudi Arabia. Salesmen used hard-sell
tactics to promote penny stocks to gullible investors. Prospects were
sent copies of newsletters with impressive names, such as The Swiss
Analyst and Strategy Market Letter.

Complaints from investors touched off inquiries in Europe and the
United States, and in 1988, French, German, and Swiss police arrested
more than twenty members of the Quinn organization. French police
picked up Tommy Quinn in July at his villa and charged him with
fraud, illegal canvassing, and violating securities laws. In Switzerland,
he was accused of fraud and forgery."' When investigators and prose¬
cutors from several countries compared notes shortly after Quinn’s
arrest, they estimated that his victims had lost more than $500 million,
making “Euroscam” — as the fraud was nicknamed — one of the
biggest stock swindles in history. Some observers believe the total take
was as much as $1 billion.

A large portion of Quinn’s loot was channeled through BCCI, ac¬
cording to the authorities. “This bank,” said a Swiss investigating
magistrate, Laurent Kasper-Ansermet, “intervenes many times in my
case.” He added that accounts were maintained at BCCI by Quinn, by
entities belonging to him, and by his lieutenant Kurt Meier. Tens of
millions of dollars were deposited in BCCI accounts in France, the
Channel Islands, Gibraltar, Luxembourg, the UAE, and the United
Kingdom. Kasper-Ansermet said there were rumors that “there was
someone inside the bank” helping Quinn’s organization.

Long before Tommy Quinn moved to France, other boiler room oper¬
ators from North America had begun fleecing investors in Europe. In
the mid-1980s, there were at least twenty boiler rooms in Amsterdam.
The Dutch city had several attractions: a central location, a good
telephone system, and — perhaps most important — virtually no regu¬
lation of brokerage firms. Until 1986, securities firms did not even
need to be licensed. One final asset was that the Netherlands had no
extradition treaty with Canada, the native country of most of the
boiler room bandits.

The biggest and most notorious outfit was First Commerce Securi-

* Quinn was eventually convicted in France of swindling ninety-three people, selling
stock without authorization, and using false passports. In July 1991, he was sentenced to
four years in prison.

FALSE PROFITS

174 )

ties, which set up shop in 1983. When the Dutch authorities cracked
down on the boiler rooms in 1986, First Commerce was raided twice
and then forced into bankruptcy in January 1987, causing its custom¬
ers to suffer huge losses. A Dutch prosecutor, Jan Koers, says the
victims lost a minimum of $100 million, and perhaps three or four
times that figure. Jan van Apeldoorn, a lawyer in Amsterdam ap¬
pointed as the bankruptcy trustee for First Commerce, says the figure
may indeed have been as high as $400 million.

Dutch police say that the man behind First Commerce was Irving
Kott, a stock promoter from Montreal with a shady past. In 1976, he
had pleaded guilty to stock fraud in Ontario and was fined
C$500,000, reportedly the largest such fine in Canadian history at that
time. Although Kott always claimed he had nothing to do with First
Commerce, police have no doubt that he is the prime culprit. Several
close associates of Kott s — including his son Michael — worked at
First Commerce. Kott himself spent months every year in Amsterdam
and, according to several witnesses, he was the man who called the
shots. A Bahamian accountant who was listed as the owner of First
Commerce’s parent company told police in a signed statement that he
was a nominee for Irving Kott. Finally, his attorneys arranged a settle¬
ment in which Kott would pay partial restitution to victims of the
fraud. (The amount of the settlement is quite small — the equivalent of
about $4 million — because the prosecutors had little leverage over
Kott. As long as he avoided coming to the Netherlands, he could not be
prosecuted on criminal charges.)

Kott’s principal front man was Altaf Nazerali, who served as chair¬
man of First Commerce, its parent company in Luxembourg (Alya
Holdings), and a Luxembourg affiliate called Asset International Man¬
agement (AIM). One of Nazerali’s duties was handling money sent in
by investors. These funds were deposited in a variety of banks in
Europe and Latin America, including a subsidiary of Algemene Bank
Nederland, a Swiss unit of Banque Nationale de Paris, and Geneva’s
Trade Development Bank/' But the Kott organization appears to have
had a particularly close relationship with BCCI.

When the First Commerce fraud was at its height, millions of dollars
arrived in Amsterdam in the form of personal checks and wire trans¬
fers. Much of the money was then forwarded to BCCI. A former

"Trade Development Bank was controlled by Edmond Safra, a New York banker of
Lebanese origin. In 1983, he sold it to American Express.

The Dirty Money Machine ( 175

associate of Nazerali’s remembers seeing him bundle up hundreds of
checks in Amsterdam and fly the package to Luxembourg. The checks
were then deposited at the Luxembourg office of Banque de Com¬
merce et de Placements, BCCI’s Swiss bank. From Luxembourg, the
money was transferred to accounts in other countries, including Swit¬
zerland and Panama.

Nazerali’s principal contact at BCCI was a senior official in Luxem¬
bourg, Kazem Naqvi, who was believed to be related to Nazerali or his
wife. A former BCCI official says Kazem Naqvi was also related to the
number-two man of the entire BCCI group, Swaleh Naqvi. (BCCI was
asked about the family connection in early 1989; a spokesman de¬
clined to comment.) When First Commerce transferred money to
BCCI, the payments were generally sent to the attention of Kazem
Naqvi. The banker also visited AIM’s Luxembourg office frequently,
according to a former associate of Nazerali’s. “Naqvi came to see
Nazerali almost every day,” he said. On at least one occasion, Naqvi
met with Irving Kott in Luxembourg. In late 1986, Naqvi moved to
Zurich and became a managing director of BCCI’s Swiss bank. Even
after the move, he continued to deal with Nazerali.

Naqvi’s prominent role was noted by van Apeldoorn, the First Com¬
merce bankruptcy trustee. “Monies usually were paid to the attention
of one person who was probably in control of that account and that
was — I think in all cases I have seen — Mr. Naqvi,” said the Dutch
lawyer.

The First Commerce organization had other ties to BCCI. A BCCI
officer in Luxembourg, Joseph El Gamal, quit the bank and joined
First Commerce’s sister company in Luxembourg, Petrusse Securities
International (the new name of AIM). Three top officials of First
Commerce came from one of BCCI’s most important satellites, the
Gulf Group, run by Pakistan’s Gokal family.

From 1982 to 1984, Nazerali had been vice president of Trans¬
gulf Investment and Finance, a unit of the Gokals’ Gulf International
Holdings S.A. of Luxembourg, according to a resume dated March 3,
1985.

Sinan A. Raouff, a board member of Alya Holdings and a “supervi¬
sory director” of First Commerce, was employed by a series of Gokal
companies beginning in 1976: Mercantile and Marine (Texas) Inc. in
Houston (in 1976), Gulf East Pte. Ltd. in Tokyo (1976-78), and
Marcotrade S.A. in Geneva (1978-82). He went to work for Transgulf
Finance Company S.A. in Geneva in 1982 — the same year Nazerali

FALSE PROFITS

176 )

joined Transgulf, remaining until at least September 24, 1984, the date
of the resume from which this information comes.

Walter J. Bonn, a Dutchman who served as managing director of
First Commerce, had worked for Stokvis International, a trading com¬
pany owned by the Gokals in the Netherlands.

Some of the Gokal alumni may have been involved in the arms trade
before joining the First Commerce group. Nazerali, according to a
former associate, used to boast that he and the other Gokal alumni
were involved in arms deals when they worked for the Gulf Group. On
one occasion, Nazerali said he had sold arms to Africa.

Raouff had impressive Middle Eastern connections. His resume
states that he was employed by the Iraqi foreign ministry from 1959 to
1968, dividing his time between Baghdad and Iraq’s embassies in
Prague, Bonn, and Tokyo. Years later, BCCI, as we have seen, financed
arms deals with both Iraq and its enemy, Iran.

The arms business was a field in which a BCCI client named
Munther Bilbeisi was active. That wasn’t all he did, though. He was
involved in such a vast array of crooked deals that he was virtually a
one-man crime wave. And he did it with the financial support and
collusion of BCCI, making the bank a full partner in his criminal
enterprises.

Munther Bilbeisi, a portly and flamboyant Jordanian merchant, was a
man of the world and a bon viveur. One day he might be sipping coffee
in a fashionable Geneva restaurant. The next day he could be found in
a nightclub in the Middle East, leering at an Arabian belly dancer. His
million-dollar-plus home was in “the Sanctuary,” a development of
luxury condominiums in Boca Raton, Florida, a posh suburb of
Miami. The apartment was just minutes from a BCCI branch, which
may not have been a coincidence. Bilbeisi once boasted that he gave so
much business to BCCI that it set up the Boca Raton branch to serve
him.

If anyone asked Bilbeisi what he did, he described himself as a coffee
merchant. That was technically accurate, but it was only a fraction of
his business activities, as a Florida lawyer eventually discovered after
years of probing.

Bilbeisi’s company, Coffee Inc., purchased coffee beans in Central
America for resale in other parts of the world, including such Middle
Eastern countries as Jordan. The banks that provided him with trade
financing insisted that he insure these shipments, so he called on

The Dirty Money Machine ( 177

Lloyd’s of London, the international insurance market. A syndicate of
Lloyd’s underwriters provided coverage for coffee beans in transit and
in warehouses and also insured some of Bilbeisi’s personal property. In
February 1987, Bilbeisi submitted insurance claims to Lloyd’s, saying
that some of the beans his company had received from Guatemala
were not the grade he had paid for: someone had switched them for
inferior beans.

Lloyd’s was reluctant to honor these claims because of a bad experi¬
ence with Bilbeisi. The previous year, he had tried to make a substan¬
tial insurance claim for the theft of an expensive Chinese vase — Sung
dynasty, he said — and several Oriental rugs, which he said were
worth hundreds of thousands of dollars. To check out that claim,
Lloyd’s retained a lawyer in Miami Beach named James F. Dougherty
II; it could not have found a more aggressive advocate.

An alumnus of Notre Dame and a U.S. Marine Corps veteran of
Vietnam, Dougherty is a cantankerous bulldog of a man with a mercu¬
rial temper and a crazed but infectious laugh. He is a tenacious investi¬
gator and a fearsome courtroom warrior. Dougherty unearthed rec¬
ords showing that Bilbeisi had bought the rugs two years earlier for
just $11,439. The lawyer found other evidence undermining Bilbeisi’s
account of the supposed theft. The insurance claim was quickly re¬
jected.

When Bilbeisi submitted his coffee claim in 1987, Lloyd’s turned to
Dougherty once again. This time, he conducted a thorough investiga¬
tion that turned up evidence of wide-ranging criminality. The decisive
breakthrough occurred when Dougherty located and deposed Tony
Aramburo, who had worked for Bilbeisi in New Orleans. In his depo¬
sitions of November.16-19, 1989, in Miami, Aramburo revealed Bil¬
beisi’s coffee-smuggling scheme in full. “He "broke the case,” Dou¬
gherty said. Confirmation of Aramburo’s allegations came from three
disgruntled former employees of Bilbeisi’s who knew many of the
secrets of the Jordanian wheeler-dealer — Steve Calderon, Joseph
Villalba, and Jose Antonio Otano — whom Bilbeisi had nicknamed
“the boys.”

Bilbeisi, it turned out, hadn’t been shipping coffee to the Middle East
at all. Instead, he had been involved in a multimillion-dollar smuggling
scheme aimed at evading U.S. controls on coffee imports. (The United
States, like most other countries, adhered to the international coffee
agreement until 1986.) The coffee wasn’t sold in Jordan but to roasters
and brokers in New York City. Bilbeisi would bring in so-called non-

FALSE PROFITS

178 )

quota coffee, which was cheap, then resell it at higher quota prices.
Bilbeisi’s “boys” and other sources explained to Dougherty how the
coffee had been rebagged to disguise its true origin and allow it to get
into the United States. The “boys” said that Bilbeisi himself had in¬
structed them and others to prepare false cargo manifests.

There was also evidence of payoffs to government officials. Accord¬
ing to the testimony of Carlos Dubon, a former associate of Anastasio
Somoza Debayle, the late Nicaraguan dictator, Central American cus¬
toms officials were bribed at Bilbeisi’s direction to ensure that the
smuggling continued.

As Dougherty continued the investigation, he found that Bilbeisi
was not just an insurance fraudster and a coffee smuggler but a veteran
arms trafficker. He had apparently sold machine guns to El Salvador
back in 1969, at the time of its so-called soccer war with Honduras. In
1974, Bilbeisi’s sale of Centurion tanks, Hawker Hunter jet fighters,
and missiles to South Africa had been described on the front pages of a
leading British newspaper. Britain’s Foreign Office intervened and
stopped the sale of the jets.

In 1980, Bilbeisi — then living in Warwick Gardens, in the Earl’s
Court section of London — had approached T. Weller Smith Aircraft
in Atlanta, hoping to buy spare parts for F-14 fighter planes on behalf
of a foreign country. The company refused to sell the parts to Bilbeisi,
pointing out that only the United States and Iran operated these air¬
craft. The American embargo on arms supplies to Iran would make
any sale without government authorization illegal. Bilbeisi had also
helped the army of his native Jordan with sales of its military equip¬
ment. By the early 1980s, according to his own testimony, he had been
“awarded the sale of all the surplus military equipment by the Jordan¬
ian armed forces.” In his role as an agent, he had also negotiated or
sold jet fighters from Yugoslavia to Honduras.

There were even indications, according to Dougherty, that Bilbeisi
was involved in sales of material that might be used in the production
of nuclear weapons. These consisted of a series of faxed messages, the
Lloyd’s lawyer said, one of which mentioned 2,000 pounds of enriched
uranium that seemed destined for South Africa.

It was only after years in the arms trade that Bilbeisi branched out
into coffee. In the early 1980s, he once explained to BCCI’s Miami
office, he decided to go into the coffee business with Mauricio
Salavarria, described as a “longtime friend and former business part¬
ner from El Salvador.” The two businesses went hand-in-hand, with

The Dirty Money Machine ( 179

Bilbeisi dabbling in arms deals with some of the same Central Ameri¬
can countries that supplied him with coffee.

In 1987 and 1988, Bilbeisi tried to sell ten Northrop F-5 jet fighters
and eighteen Sikorsky helicopter gunships from Jordan to Guatemala,
according to Dougherty. Although the fighter deal did not go through,
Bilbeisi did succeed in arranging the sale of three helicopters. To help
with this and other military sales, his company, Mura International,
retained as consultants James Vaught, a retired four-star U.S. Army
general, and Mauricio Coronado, Guatemala’s former consul-general
in Miami. By the fall of 1988, the helicopter sales were well under way.
One of the three aircraft was Royal Jordanian Air Force yi 9, King
Hussein’s personal helicopter.

This deal was extremely profitable. Bilbeisi is believed to have paid
$2.1 million for the helicopters but was able to sell them to the Guate¬
malans for $5.1 million. He tried to get financing for the deal from
BCCI, but it is unclear exactly where the money eventually came from.
Some investigators suspect it may have been routed through BCCI
units in Jordan and Switzerland. The transaction also included some
unusual payments to Guatemalan officials that amounted to payoffs,
according to Lloyd’s and to an internal investigation by BCCI. A list
provided to Bilbeisi on October 17, 1988, includes a payment of
$270,000 to Milton Cerezo, a half brother of Guatemala’s president,
Vinicio Cerezo, and planned payments of “$i 50,000 to the two gener¬
als.” The $270,000 payment was made into an account at Bank Leumi
le Israel, on Lincoln Road in Miami Beach. Milton Cerezo admitted
receiving the money but insisted it was part of a legitimate business
transaction.

Dougherty has alleged that it was these payments in Guatemala that
hampered his attempts to investigate Bilbeisi’s insurance claims there.
He also said that “Bilbeisi tried to bribe our attorneys in Guatemala
through one of the people named in the 1988 payoff list.”

Bilbeisi even offered to supply arms to the Nicaraguan contras,
according to an affidavit by Adolfo Calero, a contra leader. He said
that Bilbeisi had offered to sell him and his associates machine guns,
rockets, and other small arms. Dougherty and other investigators
suspected that Bilbeisi might well have been involved in covert arms
sales sponsored by the U.S. government. In his extensive investigation,
Dougherty found a Salvadorean passport with Bilbeisi’s picture but in
the name of Munthur Araujo. The passport bears a visa for easy access
to the United States granted by the American embassy in Switzerland

FALSE PROFITS

180 )

shortly after the passport was issued. How, Dougherty asked, could
Bilbeisi so quickly acquire such a visa for an apparently forged pass¬
port without some official U.S. government connivance?

Dougherty found that the Jordanian merchant would never have
been able to carry out many of his schemes without the financial
backing and cooperation of BCCI. “Without BCCI,” Dougherty said,
“Bilbeisi would have had a really difficult time organizing and fi¬
nancing his deals. With BCCI, they were a snap.”

Bilbeisi’s relationship with BCCI — which may have come about
through his brother Fakhri, who ran the Amman, Jordan, branch —
blossomed after he went into the coffee business. In a 1983 letter
introducing himself to BCCI’s Miami branch manager, the Jordanian
boasted, “My contracts in military and defense equipment with Qatar,
East, West, Central and Southern Africa, Central America, South
America, Caribbean and other countries proved very successful.” He
said he had diversified into commodities, supplying the Jordanian
government with twenty thousand tons of sugar, and also had become
“the main supplier of cement clinker to the Kuwait Cement Co.”
Before long, Bilbeisi was providing BCCI with some of its biggest
business in Florida. Between 1983 and 1987, BCCI’s Florida offices
lent more than $100 million to the merchant to finance the coffee
shipments he said he was making from Central America to the Jordan¬
ian port of Aqaba. Bilbeisi also used BCCI’s Amman branch to borrow
money and service his schemes.

His relationship with BCCI was apparently so close that when he
had a run-in with “the boys” — Calderon, Villalba, and Otano — he
invoked his ties with BCCI to intimidate them. “The boys” had be¬
come testy when Bilbeisi fell behind on their payments. When they
complained, the Jordanian suddenly produced a copy of Otano’s bank
statement from BCCI in London and showed it to Calderon, telling
him that Otano “had better be careful with his money” and boasting
of his close links with the bank.

BCCI’s officers connived in Bilbeisi’s smuggling activities. For years,
they ignored the requirements — attached to the short-term loans —
that the coffee be sent on to the Middle East. The bank also issued a
huge number of cashier’s checks to allow Bilbeisi to pay Central Amer¬
ican coffee suppliers without leaving a record of their names. On one
occasion, as many as thirty-one cashier’s checks totaling $765,000
were issued by BCCI’s Miami office, according to Dougherty and his
associate Richard Lehrmann, a bright young New York lawyer. BCCI

The Dirty Money Machine ( 181

also helped transfer millions of Bilbeisi’s dollars to offshore accounts
in the Bahamas and Panama.

The bank helped Bilbeisi conceal the allegedly false insurance claims
to Lloyd’s. When Dougherty demanded records from BCCI, it pro¬
vided copies of cashier’s checks Bilbeisi had used to pay for his ship¬
ments but refused to turn over copies of the endorsed sides of the
checks. BCCI also produced undated documents to support Bilbeisi’s
allegation that his coffee had been switched for inferior beans. Dou¬
gherty and his assistants also found that records had been deliberately
destroyed and that BCCI was extremely reluctant to cooperate or
provide any documentation about Bilbeisi’s trading. Even when
Lloyd’s obtained court discovery orders, BCCI would produce only
incomplete records.

Dougherty’s widening investigation turned up other intriguing
leads. Bilbeisi had been doing business with Gerardo Harris, an associ¬
ate of the Panamanian strongman Manuel Antonio Noriega. For ex¬
ample, two letters from Bilbeisi to Saad Shafi of BCCI instructed the
bank to pay Harris more than $550,000. Bilbeisi also had dealings
with Amjad Awan, a BCCI officer who acted as Noriega’s personal
banker.

Lloyd’s of London seized on the complicity of the bank and named
BCCI as a co-conspirator with Bilbeisi in a suit it brought under the
federal Racketeer Influenced and Corrupt Organizations Act (RICO)
in May 1991. Lloyd’s alleged that the coffee scheme required the
participation of “a banking institution willing to underwrite the ven¬
ture in exchange for a share in the profits.” All of the smuggled coffee
was financed by companies wholly owned by Bilbeisi using BCCI
letters of credit, according to Lloyd’s.

The RICO statute was designed to combat organized crime. In
the summer of 1991, Dougherty discovered how apt Lloyd’s use of
the statute had been. Bilbeisi, it emerged, had links to alleged Mafia
leaders in New Jersey. One of his associates was Thomas (“Corky”)
Vastola, a reputed member of the DeCavalcante crime family. Corky
Vastola is identified in FBI documents as a member of La Cosa Nos¬
tra, “with cross-family ties between the Genovese and Lucchese LCN
families.” He has “widespread influence in the entertainment indus¬
try, especially in New York City, Atlantic City, Las Vegas and Chi¬
cago.” One FBI document said that Vastola “handles arrangements
regarding the booking of nightclub acts in Atlantic City and New York
City.” According to the FBI, as far back as 1982. Bilbeisi and Vas-

FALSE PROFITS

182 )

tola considered making an offer for a huge parking lot in Atlantic
City.”'

Dougherty found so much evidence of criminality by Bilbeisi and
BCCI that he felt obligated to inform high-ranking federal law enforce¬
ment authorities. On August 5, 1989, the lawyer met with William
Rosenblatt, an assistant commissioner of the U.S. Customs Service,
and described in detail what he had learned about BCCI and one of its
biggest customers. In the presence of his own investigators, Dougherty
says, he was told that the U.S. Treasury Department and the Customs
Service “had no interest in pursuing the case.” Even though he pro¬
vided the agency with substantial information on the alleged smug¬
gling, he says angrily, “U.S. Customs never followed up on any of the
information we provided.”

Years later, the federal authorities finally took action. In 1991,
Bilbeisi and an associate were indicted for tax fraud. By that time, he
had returned to Jordan to help manage his family’s company, which
imports products from Japanese companies. Bilbeisi seemed noncha¬
lant about the indictment. “What can they do to me?” he asked as he
sat back at his luxurious villa in Amman, sipping tea. “Coffee smug¬
gler?” he said. “Let them say coffee smuggler, people will laugh. Evad¬
ing taxes? I never evaded taxes.” And there seemed to be little chance
that Bilbeisi would ever return to the United States. “I’m not going to
Miami. ... If they want to investigate me they can come to Jordan.”
Why did he leave Miami? Why, he said, he “couldn’t stand the crime.”

*The owner of the lot was MMRT Associates, a partnership that included Kenneth
Shapiro, a man identified by federal authorities as a nominee for Nicodemo (“Little Nicky”)
Scarfo, a reputed Mob boss in Philadelphia. On December 21, 1982, Bilbeisi sent a telex
to the partnership in which he said, “We contemplate an offer in the area of $18 million,”
and identified “our bankers” as BCCI in Amman, Jordan, Arab Bank Ltd., a major
Jordanian bank, and France’s Banque Paribas. The deal didn’t pan out, but Bilbeisi and
Vastola stayed in touch. The visitors’ log for March 4, 1986, shows that Vastola visited
Bilbeisi’s condominium in Boca Raton.

False Profits

Year after year, like some latter-day prophet, Agha Hasan
Abedi would trumpet BCCFs rising profits in his speeches and his
annual business reviews. For BCCI was a huge success story, a rapidly
growing and highly profitable Third World enterprise that had suc¬
ceeded in breaking into the privileged confines of high finance. From
cramped offices in Abu Dhabi in 1972, BCCI had grown into a world¬
wide institution boasting plush offices in hundreds of locations.

Abedi’s gushing comments on the group’s 1980 results are typical:
an 84 percent increase in operating profits had him purring about the
bank’s “increasing return” on its “earlier investments” and how this
justified BCCI’s “policy for establishing a global network within a
reasonably short passage of time.” In that year, the shareholders,
according to this review, enjoyed a 23 percent return on their invest¬
ment in BCCI, compared with an already healthy 16 percent in 1979.
Abedi’s deputy, Swaleh Naqvi, echoed his mentor’s message. “Let me
mention to you one word — profit,” he said in a speech in London in
1988. BCCI was, Naqvi contended, a solid and successful institution,
as was apparent in its financial statements. “The balance sheet,” he
said, “is the proof of the reality of our vision.”

Yet these proud words and healthy appearances masked an alto¬
gether different reality. From the very beginning, BCCI violated almost
every principle of sound banking, with the result that it soon had a
huge volume of shaky loans to a handful of cronies on its books. The
most notable example was the Gulf Group, the collection of shipping
and commodities companies controlled by Pakistan’s Gokal family.
Abedi had lent hundreds of millions of dollars to the Gokals, enabling

( 183 )

FALSE PROFITS

184 )

them to turn the Gulf Group into an international business empire.
In so doing, he ignored the famous banking dictum that warns, “If
you owe the bank a million dollars, the bank owns you. But if you
owe the bank a hundred million dollars, you own the bank.” The
Gokals, of course, did not literally “own” BCCI, but their debts were
so large that the bank’s fate was inextricably tied to that of the Gulf
Group.

Conventional rules of banking meant little to Abedi, partly because
he saw himself as a visionary, someone who had invented a new
style of banking that transcended the traditional ways. His hubris
really knew no bounds. He once boasted to the bank’s employees
that he understood management far better than Peter Drucker, the
highly acclaimed management guru, whom he dismissed as an “ap¬
prentice.”

For all his avant-garde rhetoric, BCCI’s banking practices were
really a throwback — an extension of what Abedi had learned when
he began his banking career in India and Pakistan. He came from a
culture in which personal connections were far more important than
the fussy statistical guidelines of accountants, financial controllers,
and bank regulators. His approach was also influenced by his craving
for political influence. The Gokals, for example, were more than sim¬
ply businessmen; they could help Abedi make valuable political con¬
nections in both the Third World and the West.

Abedi soon learned that the rules really did apply to him. No one
can engage in reckless lending for very long without incurring big
losses. In an attempt to evade the consequences of his folly, he engaged
in a massive fraud, culminating in the biggest bank robbery in history.

Abedi believed in lending money to friends, particularly friends who
impressed him as powerful and influential. That, after all, is how
banking has often been conducted in Pakistan and many other devel¬
oping countries. Traditional money changers and corner-shop finan¬
cial companies had mostly filled the role of bankers until the second
half of the twentieth century. It was only in 1941 that Habib Bank —
the first sizable bank in the subcontinent to be owned and run by
Muslims — was established in Bombay at the urging of Mohammed
Ali Jinnah, a champion of the Muslim cause who became the father of
Pakistan.

When the Indian subcontinent was partitioned in 1947, Habib Bank
moved its headquarters to Pakistan, becoming its biggest bank. There

False Profits ( 185

was a woeful shortage of financial skills in the new nation. Masihur
Rahman, BCCI’s chief financial officer, has recalled that “banking was
very poor in Pakistan in ’47.” It was a world in which accounting
skills — and, thus, reliable financial statements — were hard to come
by. Bank lending was typically an incestuous process involving friends
and influence, where the very owners of a bank might be among its
biggest borrowers. Banking supervision was at best rudimentary, and
bankers found it easy to undermine the regulatory process by provid¬
ing jobs and payoffs to supervisors. The regulators did nothing to curb
Abedi’s lending to the Gokals.

During the 1960s and 1970s, the Gokal brothers — Mustapha,
Abbas, and Murtaza — expanded into the international shipping busi¬
ness with loans from United Bank. When Abedi founded BCCI in
1972, some of the seed capital may have come from — or via — the
Gokals, according to former associates of Abedi’s. In addition, Abedi
seemed to follow in the Gokals’ footsteps in the way he structured
BCCI. The brothers had chosen London, Geneva, and Toronto as the
headquarters for their major companies. Abedi used a similar setup,
with bases in London, Luxembourg, and the Cayman Islands.

Shipping was a thriving business in the early 1970s, boosted by
growing world trade, and the Gokals were trying to ride it for all they
could. They were well positioned to scoop up business with newly
independent, developing countries in Asia and Africa, where their
Muslim and Third World background was a major asset. Abedi was
happy to finance their ambitions.

From the very beginning, the Gokals were major customers of
BCCI. Masihur Rahman said that BCCI “earned a lot of money from
them in the early days.” The Gokals placed deposits with the bank’s
London and Luxembourg offices and started borrowing money from
BCCI almost immediately. “They grew and grew,” said Rahman, “and
the bank benefited from their relationship because they generally be¬
came major players in the world trading market, in shipping; [they]
became holders of very large vessels.” In 1975 alone, loans from BCCI
made it possible for them to buy seventeen vessels.

When Abedi wanted a favor, the Gokals would reciprocate. In 1975,
for example, he needed an ally to acquire New York’s Chelsea Na¬
tional Bank. Abbas Gokal, as we have seen, told the New York bank
regulators that he would be buying the bank; BCCI would simply help
him run it. (The skeptical regulators vetoed the deal.)

Abedi was extremely impressed by the Gokals. They were cosmo-

FALSE PROFITS

l86 )

poliran men, thoroughly experienced in Western ways, who carried
themselves with style* Abbas Gokal was something of a dandy. He
sported a goatee and usually had a square silk handkerchief poking out
of the breast pocket of his double-breasted suit from London’s Savile
Row. The Gokals’ offices were elegantly appointed. In Geneva, for
example, their base was a plush building on the Cours de Rive with
expensive Italian marble even on the back stairs.

The Gokals had superb connections in both the Third World and the
West. Because of their upbringing in Iraq, they were fluent in Arabic
and quite familiar with the Arab world, which was starting to gush
with oil money. They also built connections to Washington, where they
became important shippers of goods for U.S. aid programs.

BCCI’s loans to the Gokals were made in an extremely relaxed and
cozy manner. If they wanted a loan, they wouldn’t approach a credit
officer, they would go to Abedi directly. He would then instruct Swaleh
Naqvi to lend the funds, paying little attention to such formalities as
loan documentation, statistical reviews of creditworthiness, or the
volume of loans BCCI had already provided to them.

This casual approach inevitably led to a great concentration of risk.
BCCI treated other favored borrowers similarly, but the Gokals were
the most extreme example. The danger of these practices became
apparent in the late 1970s, when the international shipping market
contracted sharply. BCCI soon found itself propping up the Gokals
with little concern for their real financial health.

Abedi engaged in another reckless practice: making large loans to
“insiders” — a term that refers to the shareholders, directors, and
officers of a bank. When the First American takeover battle began in
1978, lawyers for the company discovered that a number of BCCI
shareholders were also borrowers. The Gokals, of course, may also
have been insiders since, as noted above, they were suspected of pro¬
viding some of BCCI’s start-up capital.

Sheikh Zayed, the most important shareholder, was either unaware
of these risky practices or did nothing to stop them. The other major
founding shareholder, Bank of America, soon discovered that some¬
thing was amiss. In late 1977, B of A cut its stake in BCCI from 30 to
24 percent and pulled out entirely by 1980. It was so eager to with¬
draw that it even lent money to a BCCI-linked unit in the Cayman
Islands, ICIC Overseas Ltd., so that it could pay for the shares on
behalf of BCCI.

Bank regulators were largely oblivious of BCCI’s practices. Abedi

False Profits ( 187

had organized BCCI in such a way that no single regulatory authority
had a worldwide view of its activities. During its early years, the only
major regulatory setback occurred in 1978, when, as we have seen, the
Bank of England froze the bank’s British branch network at forty-five
because it was concerned about BCCI’s rapid growth.

The first regulator to take a serious look at BCCI was a U.S. bank
examiner, and what he found was highly disturbing.

Robert Bench, a ruddy-cheeked career bank supervisor, was the associ¬
ate deputy controller for international banking at the Office of the
Comptroller of the Currency (OCC), the federal regulatory agency
with primary responsibility for nationally chartered banks. In early
1978, Bench decided to commission a study of BCCI. He now says that
he can’t remember what prompted him to order the study, but it’s
likely that the National Bank of Georgia (NBG) deal had something to
do with it; Ghaith Pharaon, the acquirer of NBG, was a big share¬
holder in BCCI. In addition, there was already speculation that Arab
banking interests might want to buy into First American. In fact, it was
at that time that BCCI clients were buying up a large block of stock in
that company.

The man assigned to the job was Joseph E. Vaez, a diminutive
Hispanic who had spent eight years as a bank examiner. Vaez was an
excellent choice, for he was a careful and thorough examiner who took
great pride in his work. It also helped that he was based in London,
BCCI’s corporate headquarters. His main job was to keep track of
the London operations of American banks, including Bank of Amer¬
ica.

Vaez’s first step was to quiz B of A officials in London. For several
weeks, Vaez waded through B of A’s credit reviews of the mysterious
young banking institution run by ambitious Pakistanis. The latest
balance sheet data at that time dealt with BCCI’s condition as of the
end of September 1977.

In February 1978, Vaez produced his report for Robert Bench. It
proved to be an extraordinarily prescient document, exposing danger¬
ous practices at BCCI that would lead to huge losses years later. Vaez
noted that BCCI had an “extremely complex conglomerate structure,”
making it very difficult to understand how the pieces fit together. He
sought to depict the bank’s structure with a graphic containing more
than twenty different companies and the names of several Arab
sheikhs.

FALSE PROFITS

188 )

It was impossible, he said, to determine how much money had been
borrowed by BCCI or companies associated with it, including Cayman
Islands entities grouped under the name ICIC, themselves major BCCI
shareholders. When B of A’s auditors looked over BCCI, they had not
been able to examine the books of ICIC or other Cayman units. With a
financial institution, it is critical to look at all its units simultaneously
because money can be moved very quickly from one to another.

Although it was difficult to gain a complete understanding, Vaez
found plenty of signs of dangerous practices. One warning was BCCI’s
phenomenal growth rate. Rapid growth in loans can indicate that a
bank is not paying adequate attention to risks or that it is shoveling out
too much money to a small number of borrowers, producing a threat¬
ening concentration of risk. From early 1976 to September 1977,
BCCI’s loans had more than doubled — from $511 million to $1.08
billion. That alone set off alarm bells for Vaez.

And how was this lending being financed? Most foreign banks in
London funded a large part of their U.S. dollar lending by tapping into
the so-called interbank market where banks deposit money with one
another — but not BCCI. “BCCI’s name in the interbank market is
virtually unknown,” said Vaez. Most of the bank’s $2 billion in depos¬
its came from “wealthy Arabian sources,” he noted, and were “mainly
generated in the United Arab Emirates.” Vaez also found that BCCI’s
lending procedures seemed to be highly questionable. His report re¬
ferred to BCCI’s “highly personal relationships with major clients,”
delays in reporting loans to its own board, and weak credit analysis
and loan documentation.

Sizable loans to insiders were another red flag. Some of BCCI’s
biggest borrowers were members of the ruling families of the UAE,
many of whom were also BCCI shareholders. The emirate of Sharjah
had borrowed more than $75 million. There was a total of $203
million of real estate loans in the UAE, about half of which were
guaranteed by the ruling families. Such guarantees, of course, might
well end up at the door of Sheikh Zayed, the richest UAE ruler and a
benefactor of most of the rulers of the other sheikhdoms. One of the
most disturbing findings was that BCCI seemed to have no policies
aimed at preventing an excessive concentration of lending. There was,
in Vaez’s words, “no internal maximum lending limit” at BCCI. In
Western banks, a standard rule of thumb is that a bank should lend no
more than 10 percent of its capital to a single borrower. At the time of
the report, BCCI’s total capital was $63 million, which meant it should

False Profits ( 189

have lent no more than about $6 million to any one customer. How¬
ever, its loans to the Gokals’ Gulf Group totaled a staggering $185
million — equivalent to three times the bank’s capital and thirty times
the accepted ratio.

These ratios were not some academic issue; they meant that BCCI’s
very survival was at stake. If the Gokals failed to repay just a third of
their loans, BCCI’s entire capital would be wiped out and the bank
would be out of business.

And BCCI’s loan portfolio was anything but solid. Between June
1976 and September 1977, questionable loans had soared from $27
million to $226 million. By far, the biggest problem area was the Gulf
Group: fully $122.5 million of the bank’s $185 million of loans to this
group were categorized as substandard.

Vaez’s report may have played some role in the OCC’s attitude
toward the First American takeover. On a number of occasions, the
agency told the Federal Reserve that BCCI was poorly regulated and
thus should have no role in the ownership or management of First
American. But there is no sign that the OCC alerted foreign bank
regulators about Vaez’s findings. BCCI’s reckless banking practices not
only continued, Abedi and Naqvi embarked on a bold scheme of
deception to mislead regulators and auditors about the true condition
of the bank.

A central part of the scheme apparently began in 1977, after the Bank
of England imposed new rules aimed at curbing concentrations of
lending. The new regulations created a terrible dilemma for Abedi and
Naqvi. If BCCI cut back its lending to the Gokals, the Gulf Group
could well collapse, pulling down BCCI with it. It was possible, of
course, that Sheikh Zayed might agree to pump in fresh capital to
rescue BCCI, but this was by no means certain. There was, however,
another solution: a cover-up. BCCI could conceal the bad loans from
regulators and auditors.

Abedi transferred a large portion of the Gokal loans — as well as
other dubious credits — to the Cayman Islands, where banking super¬
vision was virtually nonexistent. In a masterpiece of understatement,
Masihur Rahman later said, “There was obviously more flexibility in
record-keeping in Grand Cayman.” So many bad loans were trans¬
ferred there that BCCI officers used to refer to it as “the dustbin.” As
Shahid Suleri, a BCCI branch manager, later told a reporter, “All of us
had, in BCCI that is, had our, you know, Cayman horror stories. What

FALSE PROFITS

190 )

amazed us to begin with was that [it] appeared to be the place where
every problem loan was transferred to, was dumped.” And no one, he
added, knew what happened to those loans once they were transferred
to the Caymans.

At the center of this growing fraud was a loose collection of dummy
companies in the Caymans, many of which were collectively known as
the ICIC Group and constituted a bank within the bank. The ICIC
Group worked closely with BCCI’s Caymans branch, itself the least
regulated part of the far-flung group. The initials stood for Interna¬
tional Credit Sc Investment Company and had originally been used by
Abedi between 1972 and 1976 to refer to a charitable trust and other
entities he had set up in that period to hold a large proportion of
BCCI’s stock — up to half the bank’s shares in its early days. The ICIC
Group included a host of other entities, among them subsidiaries, a
charitable foundation, and the BCCI staff benefit fund.

In April 1976, Abedi had formally incorporated two holding com¬
panies in the Cayman Islands: ICIC Holdings Limited and ICIC Over¬
seas Limited. To serve as nominee shareholders of ICIC, Abedi re¬
cruited a handful of trusted lieutenants, men who were also of Muslim
Indian origin from Uttar Pradesh and who had worked with him since
the 1950s. The ICIC entities were clearly part of the BCCI group, yet
their accounts weren’t consolidated with the parent bank’s. What this
meant was that the auditors were never able to gain a complete picture
of the group. In addition, the Caymans branch was the head office for
BCCI’s Bank of Credit and Commerce International (Overseas) Ltd.
holding company, which was separate from BCCI’s Luxembourg hold¬
ing company and, until 1986, audited by a different firm.

Abedi and Naqvi were personally in charge of this scheme: audits
from the Grand Cayman branch went directly to them. Naqvi’s assis¬
tant Hashim Shaikh took direct responsibility for managing the Gokal
accounts. Price Waterhouse, which audited ICIC, accepted the story
that there were several accounts they weren't allowed to examine
because they belonged to secretive Arab sheikhs and were “confi¬
dential.”

To manage the deception, Abedi and Naqvi established a so-called
special duties department. Based at BCCI’s Leadenhall Street head¬
quarters (about two hundred yards from the Bank of England) and
including a few other bankers in nearby Cunard House, the depart¬
ment employed around a dozen people. Most of them were based in
London, but — according to an auditor’s report — a few were in other

False Profits ( 191

BCCI offices, including A. Abbas, the manager of BCCI’s Bahrain
branch, and the general manager of the Grand Cayman branch, Syed
Ziauddin Ali Akbar until 1986 and thereafter S. M. Akbar.

If anyone outside the bank found out what was going on, it could
spell disaster for BCCI, so Abedi took various steps to ensure secrecy.
One precaution was to physically separate special duties employees
from other BCCI staffers. Some of them worked in a small office on an
upper floor of the head office, where they would have relatively little
contact with others. Another precaution was to use people in whom
Abedi had'total confidence. All of the department’s employees were of
Pakistani origin, most of them Shi’ites whose families came from
around Lucknow, and all were very loyal to Abedi and Naqvi.

Hasan Mahmood Kazmi, a central figure in the scheme, was a prime
example. He was devoted to Abedi, having worked for him since the
19 50s. The ties between their families went further back, to the court
of the rajahs of Mahmudabad near Lucknow and its ruling clique of
Shia Muslims. Kazmi’s forebears had worked as servants for the rajah
and his family, ranking below such courtier families as the Abedis.

Money was also a factor in the loyalty of certain members of the
special duties department. Abedi had brought most of them to En¬
gland, paying them much higher salaries than they could have earned
in Pakistan. In addition, BCCI granted nearly all of them sizable loans
that they knew they probably wouldn’t have to repay if they left the
bank. If any of these trusted clerks did choose to leave, he might also
receive a handsome farewell check. Jamshid Khan, who handled the
accounts of Kamal Adham and his associate Sayed Jawhary, received
$300,000 upon leaving the bank, according to an auditor’s report.
Another employee, Hashem Sheikh, walked away in 1988 with a $1.7
million payment from Naqvi, the same report says. These were stag¬
gering sums for people who were essentially doing clerical work — but
it was clerical work of a very confidential nature.

In carrying out this scheme, it wasn’t enough simply to move ques¬
tionable loans to the Cayman Islands. BCCI officials also used a series
of dummy companies to shift loans from one place to another in a
massive and complicated shell game. Almost as soon as the Gokal
accounts were moved to the Caymans, Naqvi and Hashem Sheikh
began to manipulate them, moving money around to make it appear as
though regular interest payments were being made. The Gokals helped
with this manipulation, which involved the manufacture of false docu¬
ments, the deliberately exaggerated use of accounts, and the secret

FALSE PROFITS

192 )

transmission of funds. Money would be whisked around the BCCI
empire, through the London, Grand Cayman, and Madrid branches
and through BCCI’s affiliated banks in Switzerland and Oman. The
Gokals even provided the special duties department with stationery for
their companies, including account opening forms and letters with
payment instructions, to speed up the document fabrication necessary
to spirit funds around the globe to conceal their growing debts. It
would soon be hard for investigators, even for the perpetrators of
the fraud, to sort out the reality from the fiction, the false profits from
the real losses. (The Gokals, through their lawyer, deny any wrongdo¬
ing.)

The deception showed results very quickly. Vaez’s report stated that
BCCFs loans to the Gokals stood at $122.5 million in September
1977, as we have seen. Accountants from Price Waterhouse, however,
estimated that they owed just $80 million at the end of 1977. It is
almost inconceivable that the Gokals repaid more than $40 million in
just three months. Their primary business, international shipping, was
headed into a prolonged dive. In addition, the supposed shrinking of
these debts occurred at the same time the brothers were trying to
expand their way out of the shipping recession by using borrowed
funds to buy cargo ships and companies. A commodity trader who
dealt with the Gokals in Geneva recalls that there were frequent ru¬
mors that the brothers were in terrible financial trouble.

The answer, of course, is that the Gokals’ debts did not diminish.
They had simply been transferred off the BCCI balance sheet to shell
companies controlled by BCCI in the Caymans. What is more, BCCI
continued shoveling money to the Gokals during the remainder of the
1970s and throughout the 1980s. “Their loans just jumped and
jumped and jumped,” said Masihur Rahman, “till it was about $600
million to a single party.”

Like lies, frauds tend to multiply: the commission of one fraud
usually requires at least two others to cover it up. The account manip¬
ulations perpetrated by Abedi, Naqvi, and their special duties depart¬
ment were no exception. To disguise the scale of their debts to BCCI,
the Gokals borrowed through more than sixty companies, including
entities with such names as Marcotrade and Harpon Trading as well as
myriad companies with Gulf in their titles. Just managing this scheme
would eventually involve no less than 750 accounts at BCCI through
which a staggering total of $15 billion was routed in the 1970s and
1980s.

False Profits ( 193

Other bad loans were also moved to the Cayman Islands, causing
the balance sheet of BCCI’s Grand Cayman branch and the ICIC
companies to grow rapidly over the next few years. By the mid-1980s,
the total assets in the Caymans were as high as $2.5 billion — about 15
percent of the BCCI group’s assets.

BCCI’s “bank within a bank” in the Cayman Islands was involved in
yet another sensitive operation: making loans to many of BCCI’s own
stockholders. At any bank, lending to insiders can be risky, but at
BCCI, it was part of an audacious fraud: the manufacturing of fake
equity capital.

Equity capital is the foundation of a corporation and the most
essential buffer for a bank. When a company is established, investors
contribute money and receive shares of stock in return. If the company
becomes profitable, some of the profits may be retained by the com¬
pany to strengthen the capital base. If the firm loses money, the equity
serves as a kind of shock absorber. Losses come out of equity capital,
but if there is sufficient equity, the bank has time to regroup, improve
its strategy, and return to profitability.

In BCCI’s case, a strong base of equity capital was particularly
important. It was, after all, a somewhat mysterious bank with holding
companies incorporated in two weakly regulated financial centers:
Luxembourg and the Cayman Islands. Luxembourg had no central
bank, which meant that there was no institution to provide BCCI with
temporary loans if it ran into liquidity problems.

If potential depositors expressed concerns about BCCI, bank of¬
ficials would say that there was no need to worry. BCCI was owned by
fabulously wealthy oil sheikhs who had injected millions of dollars
into the bank over the years, and they would certainly be willing to
help it out if it ran into trouble — if only to safeguard their invest¬
ments. “When we wanted to deal with many official bodies, large
corporations, various agencies,” explained Abdur Sakhia, who was
BCCI’s senior man in the United States, “they would always ask us,
who is the lender of last resort? And we would say, ‘the richest man in
the world,’ because we were owned partially by the ruler of Abu
Dhabi.” BCCI’s bankers would also point to their balance sheet, which
Sakhia and others would boast was “one of the best ... in terms of
ranking, in terms of financial ratios, in terms of liquidity.”

So where did BCCI’s equity capital really come from? When Abedi
founded the bank in 1972, he certainly did raise some of the start-up

FALSE PROFITS

194 )

capital from Bank of America and Sheikh Zayed. But he was always
vague about the rest of the money.

When, in 1978, Abedi was a defendant in a lawsuit by First Ameri¬
can, he had said in a deposition that a large portion of BCCFs stock —
as much as 50 percent — was held by ICIC. He said that the balance of
the stock was split about equally between Bank of America and
twenty-five to thirty Middle Eastern investors. But what exactly was
ICIC? Even Abedi seemed unsure. He described it as “an institution
which is in the process of evolution.” It would become a staff benefit
fund and a charitable foundation. For the time being, though, Abedi
told his mystified audience, ICIC’s owners were “nominee sharehold¬
ers of the foundation” who “have no beneficial ownership as such.”

Later, the explanations and the details kept changing. In July 1978,
Euromoney published a lengthy article on BCCI and obtained share¬
holder information from the bank. A chart identified ICIC as owning
41 percent of the bank, Bank of America, 24 percent, and “Middle
East interests,” 35 percent. This group was further identified (with no
percentages listed) as comprising members of the “ruling families” of
Bahrain, Sharjah, Abu Dhabi, Dubai, Saudi Arabia, and Iran as well as
“Middle Eastern businessmen.”

In 1983, the bank released a list of its shareholders in connection
with an offering of floating-rate notes in the international capital
market. The list contained some of the richest Arab sheikhs in the
Persian Gulf: Sheikh Zayed’s eldest son, Khalifa, owned 13.05 percent
of the bank’s stock and ranked as the second-largest shareholder;
Zayed’s Abu Dhabi Investment Authority held 10 percent of the stock;
the Saudi officials Kamal Adham and Abdul-Raouf Khalil were the
fourth- and fifth-biggest individual shareholders, with respective hold¬
ings of 3.87 and 3.44 percent. Powerful members of Saudi Arabia’s
ruling family were also named: Prince Turki bin Nasser bin Abdul Aziz
al-Saud owned 1.21 percent of the bank’s shares, and the interior
minister, Prince Naif bin Abdul Aziz al-Saud, held 0.16 percent.

But there were some curious changes in the bank’s various share¬
holder lists. Swaleh Naqvi was on the 1983 list as the owner of 0.03
percent of BCCI’s stock. On another list released five years later, his
name was missing. Ghaith Pharaon was cited as the biggest single
shareholder in 1983, but his stake later dropped and then disappeared
altogether in 1986, while that of his brother Wabel rose sharply.

The reality was that many of the wealthy Arab sheikhs on these lists
had not risked their personal funds at all; they had borrowed from

False Profits ( 195

BCCI itself to finance the stock purchases with the understanding that
they would not have to repay the loans. What this means, of course, is
that the very foundation of BCCI was to a great extent artificial. Much
of the bank’s equity capital was simply made up of loans that might
never be repaid. It was a bank built on sand.

At the very founding of the bank, Abedi had used nominees equipped
with borrowed money to provide capital. According to some of
Abedi’s associates, the visionary banker lent more than $2 million to a
group of his friends in his last months at United Bank. These credits
were then written off as bad debts, and the money was used to capital¬
ize BCCI.

Certainly, it was only by using such front men over the years that
Abedi was able to boost BCCI’s share capital from just $2.5 million in
1972 to $845 million in 1990. To compensate the nominees for the use
of their names, Abedi and Naqvi agreed to buy back shares at particu¬
lar prices. They also promised that the nominees would earn specific
rates of return on their share investments. To achieve these returns,
Naqvi and his associates manipulated the price of the bank’s privately
held stock. Much of the stock manipulation was done through ICIC.
As early as the late 1970s, ICIC was buying and selling BCCI stock to
manufacture profits, boost the share price, and maintain confidence in
the bank.

With the exception of Bank of America’s stake, it is possible that all
of BCCI’s original capital was financed by bank loans. Congressional
investigators have concluded that while Sheikh Zayed and his acolytes
had supported BCCI with deposits from the beginning, they them¬
selves may not have put much capital into the bank. “Abu Dhabi
appears not to have capitalized BCCI, but instead to have insisted on
guaranteed rates of return for the use of its money,” a congressional
report on BCCI said in the fall of 1992.

To disguise the funding of its nominees, Abedi and Naqvi used the
ICIC group to move money in and out of the bank. By March 31,
1991, out of the $485 million of loans ICIC had made, as much as
$160 million had been lent to BCCI shareholders to finance purchases
of shares in the bank and its related companies. Effectively, ICIC was
enmeshed in the most incestuous trading and funding of shares in
BCCI, which was simultaneously its subsidiary and its parent.

Fees were paid to nominees willing to lend their names to such
irregular share transactions. Faisal Saud al-Fulaij, a Kuwaiti investor

FALSE PROFITS

196 )

who frequently acted as a nominee for BCCI, received $ 100,000 a year
and a $606,000 payment on August 23, 1990, according to British
investigators. Mohammed Hammoud, another important nominee,
received as much as $1 million a year in the late 1980s, according to
the investigators. Naqvi and his team often guaranteed returns, too, in
lieu of payments. In December 1979, for example, ICIC Overseas
guaranteed a return of 1.75 percent over the prevailing interbank
deposit rate to Sayed Jawhary in exchange for a $2 million investment
in BCCI shares.

The use of such nominees to hold the company’s shares was so
extensive that by the end of 1989 as much as 45 percent of BCCPs
entire share capital was in the hands of front men, with a further 11
percent owned by ICIC entities. Through such devices, Abedi could
increase the bank’s capital at will. A former senior BCCI officer recalls
meeting with Abedi at the bank’s headquarters in London to discuss
BCCI’s need for additional capital. “Why don’t we increase the capi¬
tal?” Abedi said. “Why don’t we increase it to $800 million?” And,
miraculously, the capital soon grew to $800 million from its previous
level of $600 million. “I don’t know where the money came from,” the
senior BCCI officer says. Subsequently, the two men again discussed
the bank’s capital. “Why don’t we make it $1 billion?” Abedi said.
Again, the capital soon jumped to $1 billion. The banker recalls won¬
dering at the time, “Is this guy printing his own money?”

Some of the more devious accounting tricks were performed under
the supervision of Kazmi, whose title was general manager of ICIC. He
would write to some of BCCI’s coterie of sheikhs, assuring them that
they had no liability for the many transactions that were being carried
out in their names. “Your Highness. ... You wouldn’t be liable for the
repayment of the [loan] under any circumstances,” Kazmi assured the
ruler of the emirate of Ajman, Sheikh Humaid bin Rashid A 1 Naomi, in
1983. It was just as well. Unlike Sheikh Zayed, Sheikh Humaid had no
huge oil wealth to call on to honor his loans. Kazmi also wrote similar
letters to Kamal Adham. This practice of essentially renting the
sheikhs’ names with their consent — used from the very outset at
BCCI — became increasingly common as the bank sought to hide its
growing losses and increase its “capital.”

Judging by their correspondence with ICIC, at least some of these
nominees knew precisely what their role was. Wabel Pharaon, Faisal
al-Fulaij, and others wrote to ICIC, setting out their roles as nominees.
“I ratify and confirm all your actions by way of acquisition, purchase

( 197

False Profits

and sale of the said shares [in BCCI] in my name as your nominee,”
Wabel Pharaon wrote to ICIC on December 4, 1984.

Many, if not most, of BCCI’s loans to its own shareholders to
finance share purchases or other secret BCCI ventures weren’t repaid.
Moreover, the recipients of the funds generally didn’t pay much inter¬
est at all, if any. BCCI itself had to cover up these holes; otherwise it
would have become plain that the bank was using nominees and was
involved in a huge deception. This amounted to a massive fraud on
BCCI’s depositors, duping them into believing that the bank was
backed by wealthy oil sheikhs and was thus a safe place for them to
leave their savings. Many of these depositors were poorer people from
developing nations who had to struggle hard to gather their meager
deposits in BCCI. The bank went even further: it began to steal its
depositors’ money.

Abedi, Naqvi, and members of the special duties department took to
collecting customers’ deposits without even recording these liabilities
on the bank’s books and using the money to make interest payments
on its loans to the nominees.

Just as BCCI had transferred many of its big and suspect loans to the
Cayman Islands, so it began to transfer lots of its big-dollar deposits
there. A large portion of this money had been collected in developing
countries, much of it from Islamic banks. Like a centrifuge spinning
out of control, the frauds in and around the bank were spreading
exponentially.

To bolster its supply of “unrecorded deposits,” Naqvi and his spe¬
cial duties team began to use ICIC to misappropriate money from
BCCI. These funds were then directed into the accounts of the Gokals’
Gulf Group and other delinquent accounts to allow them to seem
solvent and to conceal the extent of their borrowings from BCCI. By
booking excessive interest payments and other charges against the
Gokal loans, BCCI also was able to provide itself with apparent
profits.

Once this mechanism for routing money illicitly was set up, it was
also easy to loot the bank directly, by siphoning out depositors’ money.
As the looting gathered pace, straight transfers were made to less
regulated companies like ICIC, Capcom, and other BCCI satellites as
well as to senior BCCI officials. For example, on March 26, 1985,
ICIC approved an interest-free loan to Swaleh Naqvi of £325,000
(about $600,000). Abedi clearly intended that the loan would not be

FALSE PROFJTS

198 )

collected, according to a BCCI file memo relating to a conversation
between ICIC’s clerk Kazmi and Abedi in January 1988: Abedi asked
Kazmi “to write off the loan” and instructed him to pay Naqvi £3,000
a month. Much bigger sums were also involved. Imran Imam of the
special duties department instructed ICIC to draw down a loan of
$50.6 million in the name of Ghaith Pharaon, then to pay this money
to National Commercial Bank’s Jiddah office.

This was the ultimate abuse of the trust placed in a bank by its
depositors. Abedi and his associates had cynically turned a Third
World institution into a mechanism for robbing depositors from devel¬
oping countries. And the beneficiaries were rich sheikhs from the
Persian Gulf, BCCI’s associates around the world, and the bank’s own
management.

By stealing depositors’ money, BCCI had become a Ponzi scheme.
This type of fraud is named for the Italian-American swindler Charles
Ponzi (1883-1949), who attracted deposits in the 1920s by offering
returns that were well above the market’s expectations. To make these
high interest payments, the con man dips into the deposits entrusted to
him. This, in turn, produces a growing hole in the accounts. But, by
appealing to the greed and credulity of depositors, the operator of the
scheme is — for a time, at least — able to continue attracting deposits.
Ponzi, through his Securities Exchange Company in Boston, collected
more than $15 million in less than a year by offering to double
depositors’ money in six months. Ponzi’s scheme ran at breakneck
pace. Meanwhile, its perpetrator moved from a shabby garret to a
twenty-acre estate with a fabulous mansion and a heated swimming
pool within just a few months.

BCCI’s Ponzi scheme developed more gradually, but it was much
larger and more difficult to detect because of the multiple jurisdictions
in which the bank did business and the secretive maze of companies
and front men. In essence, however, it was the same scam that Ponzi
had perpetrated. BCCI was plundering its deposits because it needed
an ever-greater supply of funds to keep paying high returns to its
nominees and investors and to cover the growing holes in its balance
sheet. Money also went into the pockets of BCCI officials.

In this heady atmosphere, where “capital” and “profits” could be
conjured out of the air, Abedi and his staff joined in the looting. And
they used depositors’ funds to take huge risks in the foreign exchange,
commodity futures, and options markets.

False Profits ( 199

As the fraud grew, so did the need to move large sums of money out
of the sight of regulators. Just about the only places to do that were the
futures and options markets, which happen to be the riskiest markets
in the world. But these markets could also offer Abedi and Naqvi the
chance to hit the jackpot and make enough money to cover the gaps in
BCCI’s balance sheet.

Several BCCI associates had already been burned in the commodity
markets. Sheikh Zayed, for example, had fallen out in 1980 with
Abdullah Darwaish, who ran his private office and had been his am¬
bassador to Pakistan, as noted in Chapter 3. Darwaish and Riaz
Aslam, a Pakistani and one of the sheikh’s financial advisers, invested
in the metals markets, incurring losses of about $100 million. The
resulting squabble dragged through the U.S. courts for years before
Zayed dropped the suits. Darwaish was briefly detained, but Aslam
was not released until 1990.

But nothing would match the wild gambling spree by BCCI’s trea¬
sury department in the early and middle 1980s. At every major bank,
the treasury department plays an important role. If the bank needs
additional deposits to fund its loans, the treasury department raises the
money in the interbank market or issues certificates of deposit to
investors. If the bank has surplus cash, the treasury department places
it in the interbank market or invests it in short-term instruments such
as U.S. Treasury bills and certificates of deposit. The treasury depart¬
ment is also responsible for dealing in foreign exchange and other
financial markets. At conservative banks, the treasury department tries
to raise money cheaply and avoid losses. More aggressive institutions
treat the treasury department as a profit center, hoping its traders can
make a few million dollars by maneuvering more skillfully than other
players in the market. BCCI’s treasury department took risks far be¬
yond those of even the most aggressive banks. The treasury depart¬
ment, quite literally, bet the bank in its efforts to control and maintain
the sprawling frauds at BCCI.

The chief trader at BCCI responsible for this gambling spree was
Syed Ziauddin Ali Akbar, who became head of the treasury depart¬
ment in 1982. He was a smooth and debonair banker in his thirties
with intimate ties to BCCI’s top management. Akbar wore two hats at
BCCI: while running the treasury department in London, he managed
the Grand Cayman branch. This combination may sound absurd, but
it made sense in the context of BCCI. For one thing, all the important
decisions about the bank’s Caymans entities were made in London.

200 )

FALSE PROFITS

For another, the treasury department for the entire BCCI group was
part of its Caymans holding company (rather than its Luxembourg
holding company). The Grand Cayman branch was also where BCCI
maintained the accounts of some of its most important customers and
shareholders, including Kamal Adham, Abdul-Raouf Khalil, Ghaith
Pharaon, and the Gokals. It thus fell to Akbar to manage these monies
under Naqvi’s supervision.

After taking over the treasury, Akbar claimed to be making big
profits on the bets he took in the financial markets. Not that it was easy
to verify these claims; with characteristic sloppiness, BCCI consoli¬
dated its treasury results with those of the Grand Cayman branch,
rather than providing a separate and detailed account of the bank’s
trading activity.

Top officials of BCCI were impressed by Akbar’s apparent profits,
and he was given all the bank’s surplus funds for his trading and
investment schemes. This wasn’t, of course, the bank’s own money;
these were deposits purloined from BCCI’s customers. Akbar took
wild risks with these funds, carrying out many of these trades in the
names of some of BCCI’s rich clients, in many cases with their permis¬
sion, according to the auditors. It is hardly surprising that these rich
clients — many of whom were Arab sheikhs — would agree to Akbar’s
free use of their names. He wasn’t using their money, after all, but was
merely renting their names.

Two of these sheikhs, Adham and Khalil, appear to have benefited
enormously from Akbar’s shenanigans, receiving large transfers of
money to their accounts at Capcom from BCCI’s treasury department.
Akbar also would use the names of some of Khalil’s companies, includ¬
ing Razat Associates Inc. and Maram Trading Company, according to
Price Waterhouse. This was apparently done with Khalil’s knowledge
and permission, and — according to some accounts — Akbar was
often doing Khalil’s bidding in these transactions. (Khalil denies any
wrongdoing.)

Akbar was an old friend of Khalil’s and Adham’s. He had known
them since the mid-1970s, when he worked at National Bank of
Oman, the joint venture bank owned by BCCI and Bank of America.
Akbar and Khalil were also engaged in several U.S. real estate ventures
together, as we saw in Chapter 6.

The Gokals also became involved in BCCI’s plunge into speculative
markets. As part of their diversification, the brothers acquired a com¬
modity trading outfit in Geneva called Tradigrain, which they later

False Profits ( zoi

conveniently sold to Ghaith Pharaon. Gil Miller, a veteran of the
Chicago futures business, traded frequently with the Gokals. He re¬
membered the sangfroid with which Abbas Gokal would receive news
of massive losses. Most other people, Miller said, would have been
screaming or crying at such setbacks. Abbas “loved the game, he loved
currencies,” Miller recalled in the summer of 1991. Like many players
in the dangerous commodity markets, Abbas was “addicted to it.”

Like Abbas Gokal, Akbar took enormous risks in highly speculative
markets — such as that for options on U.S. Treasury securities. Op¬
tions are notoriously volatile investments that can bring wonderful
windfalls or wounding losses. By investing in options to buy U.S.
Treasury bonds at a particular yield on a particular future day, an
investor is betting on the likely course of U.S. interest rates. Akbar,
under Naqvi’s supervision, was “taking positions on silver, and on
twenty-year bonds, suggesting that twenty-year bonds would [yield]
7 percent or 8 percent, which anybody who understands treasury”
would think was absurd, Masihur Rahman, the bank’s finance direc¬
tor, has said.

BCCI took on huge risks in these markets, totaling an astounding
$11 billion, according to Rahman. This, he added, was eleven times
the maximum exposure that the bank’s treasury committee had set for
investments in the commodity and options markets. But Akbar, using
the bank’s Caymans units, had apparently been able to ignore this limit
without the knowledge of some of his superiors. Naqvi knew the
details of Akbar’s strategy, according to Rahman. The huge exposure
of $11 billion of options contracts was possible only because of the
practice in the commodity and option markets of requiring investors
to put up only 10 percent of the total amount they were investing.

Inevitably, Akbar began to incur huge losses. Dating all BCCI’s
losses in the commodity futures and options markets precisely is dif¬
ficult particularly because of the complex deceptions that Akbar used
to cover them up. Other people, including BCCI’s auditors and regula¬
tors at the Bank of England, have stated that the losses began perhaps
as far back as 1977, years before Akbar became involved. Others
maintain that the “options losses” were just a convenient cover for all
the bank’s many different losses and for the looting of its treasury.

Senior BCCI officers and those who have struggled to understand
the bank generally agree that the most spectacular losses apparently
occurred between 1983 and 1985, when Akbar took big bets in the
U.S. Treasury bond options market. This insane trading, which had

202 )

FALSE PROFITS

many professionals in the market wide-eyed, went on for years with¬
out a peep from the auditors or the bank regulators. Under the cover of
a huge volume of transactions, Naqvi, Akbar, and others made large
transfers, robbing the bank of hundreds of millions of dollars in the
process.

Pierre Jaans, the chain-smoking chief of Luxembourg’s bank regula¬
tory agency, the Institut Monetaire Luxembourgeois (IML) and a vet¬
eran of the Bundesbank, Germany’s central bank, had met with senior
BCCI officers every few months since the bank was incorporated in
Luxembourg in 1972. The government had been eager to boost the
tiny country as a banking center, and Jaans was impressed and encour¬
aged by Abedi’s arrival with rich Arab backers. BCCI swiftly became
one of the biggest banks in Luxembourg, although it was something of
an anomaly in the grand duchy’s growth as a financial center. This goal
had been achieved mostly by attracting subsidiaries of big interna¬
tional banks that wanted to take advantage of tax breaks for issuing
and listing international bonds.

In late 1985, Jaans and his colleagues at the IML became concerned
about gossip regarding BCCI’s unbridled trading activity. This timid
and understaffed agency, which had been blithely unaware of BCCI’s
outrageous practices for years, now asked the bank’s auditors at Price
Waterhouse to review its treasury activities.

The auditors discovered evidence that the bank had suffered big
losses on its futures and options trading and that it had not recorded
them properly. Naively, perhaps, Price Waterhouse assumed that the
losses were the result of incompetence. Several years later, it reported
to the Bank of England that it had gradually become convinced that
Akbar had fraudulently inflated the treasury division’s income: he
often wrote options contracts toward the end of the month and, by
accounting incorrectly for the fee income accrued, generated false
profits for the treasury division. The options contracts incurred huge
and growing losses. But they were not charged to BCCI. Instead, they
were booked against clients’ accounts or covered up with bogus loans
or unrecorded deposits.

BCCI’s commodity trades were in any case a zero-sum game. For
every loser, there’s a winner on the other side. And to understand these
huge losses properly, investigators would also have to learn who was
on the other side of these trades. If BCCI was the loser, who was the
winner? In the London markets there were direct counterparties, but
in the more regulated U.S. markets the counterparty is always the

False Profits ( 203

exchange itself. Even in the United States, though, counterparties can
effectively be created by arranging so-called mirror trades, whereby
another trader or firm agrees to perform a simultaneous trade with the
exchange, thus becoming the other side of the transaction.

Many of the big commodity trading companies certainly benefited
greatly from Akbar’s apparent foolhardiness, and none more so than
Capcom, the BCCI satellite in London. The other main brokers used
by BCCI were Refco, Rudolf Wolff, and Bear Stearns. (Rudolf Wolff
even had a separate office to deal with BCCI and, according to the
auditors, allowed the bank an overdraft of $40 million on December
31, 1984, which the auditors suspect was used to help hide the bank’s
losses.) Until BCCI stopped its trading in options and futures, the bank
was Capcom’s main source of business, generating revenues of some
$16.7 million in 1985. But once the scale of the bank’s losses became
apparent in October 1985, it stopped trading in these markets.

When it withdrew, BCCI was left in a terrible quandary. If it closed
out its options contracts, it would have to report losses of hundreds of
millions of dollars. It delayed announcing its 1985 results, but news of
the problems leaked out. A story in the European edition of the Wall
Street Journal in late May 1986 quoted BCCI sources as saying that
the bank had lost as much as $150 million on its trading in U.S.
Treasury bond options. In response, BCCI issued a statement on June
2 confirming the Journal's story.

The bank’s official version of the losses was that a total of $285
million had been lost, of which $150 million was charged in 1985, $75
million in 1984, and $60 million in 1986. The reality was much worse
than even these horrific figures. Not only had BCCI’s stated equity
been wiped out, the bank’s liabilities vastly exceeded its assets. For
years, though, the auditors apparently didn’t properly understand, or
disclose, the scale of the fraud that produced the losses.

Abedi and Naqvi, however, knew what had happened. When Akbar
left the bank in 1986, he gave Naqvi a detailed summary. This docu¬
ment — which the auditors said they didn’t see for several more
years — shows accumulated losses of $849 million for the years 1982-
86 and states that Akbar inflated profits by $108 million in 1982, $136
million in 1983, and $234 million in 1984.

To help cover up the losses, Akbar had used $400 million of deposits
that weren’t even recorded in BCCI’s books, $250 million of money
managed by ICIC, bogus loans, deposits from the bank’s Abu Dhabi
subsidiary, and funds from other sources, auditors said in 1991. More
than $60 million of the unrecorded deposits belonged to the govern-

FALSE PROFITS

2.04 )

menr of Cameroon, in West Africa. But the biggest chunk — $246
million — came from Feisal Islamic Bank, an institution in Cairo that
is controlled by the Saudi ruling family. The special duties department
seemed to prefer to use Islamic bank deposits because they didn’t
accrue interest and didn’t have to be accounted for in an orthodox
way. Arjmand Naqvi, the account officer for Feisal Islamic Bank, was
an important member of the special duties department.

Capcom was probably the most important vehicle for looting
money from BCCI between 1984 and 1986, company documents
show. For example, in four separate transactions, a total of $221
million was transferred to Capcom from BCCI. Much if not all of this
money went to accounts in the names of Adham and Khalil.

The huge transfers out of BCCI to Capcom were made up of a
number of different payments, according to work carried out by audi¬
tors and investigators in 1991 and 1992. A profit schedule found in
Akbar’s desk in London showed a Capcom account — called
ARKY — making $53 million out of its transactions with BCCI. Some
U.S. investigators believe this account was controlled by Khalil. Ac¬
cording to one investigator’s notes, “These profits were made from
October 1984 to September 1985, the period in which BCCI lost $430
million at Capcom. This is the clearest evidence that the shareholders
of Capcom and/or Akbar stole funds from BCCI through artificial
market transactions.” The picture is really not that clear, however,
since Akbar may have used the names of Adham and Khalil without
their knowledge.

On June 25, 1985, BCCI’s treasury division transferred $68 million
to a Capcom subsidiary “for an unknown purpose,” Price Waterhouse
said in 1991. Payments totaling $50 million were made to Capcom in
March 1986 out of BCCI’s treasury “for which no liability for pay¬
ment was recorded,” the auditors said. These payments were made on
Naqvi’s instructions. It is unclear exactly where this money went after
it reached the Capcom accounts apparently controlled by Adham,
Khalil, and Akbar. Many Capcom documents were deliberately de¬
stroyed in late June 1991 by a company official.

Some U.S. investigators are intrigued by Adham’s and Khalil’s intel¬
ligence connections. Both men, of course, were veterans of Saudi intel¬
ligence and were closely associated with U.S. intelligence operatives.
This relationship has fueled speculation that some of the money may
have been used to finance covert operations by the Saudis and the CIA.

False Profits ( 205

BCCPs reckless lending and trading — and the looting of deposits to
cover up the losses — left the bank little more than an empty shell.
Abedi, Naqvi, and their associates could not possibly let the truth
come out. If they did, the whole edifice would come crashing down,
and many of the thieves would be rounded up and thrown in jail. And
so they began to steal even more money, to hide BCCI’s losses and lack
of capital.

The Ponzi scheme became even bigger and more complicated in the
mid-1980s. Huge sums were taken from depositors and routed
through various accounts to make it appear that loans were being
serviced in a timely fashion. In 1986 alone, the special duties depart¬
ment routed an extraordinary $1.6 billion through a maze of accounts.
Many transactions through BCCPs Swiss unit, Banque de Commerce
et de Placements, even carried the advice “Pay without mentioning our
name.”

As the deception grew, the special duties department created more
and more fictitious loans so that the bank could show apparent profits.
When, for example, sheikhs who had bought BCCI shares on guaran¬
teed terms demanded their money back, the returned funds would
often be booked as fictitious loans.

The auditors and regulators now say they had little idea at the time
of what was going on. For example, they say they were unaware of
BCCPs cozy relationship with Capcom. But one incident should have
been enough to alert even the most obtuse person that something was
very rotten at both BCCI and Capcom.

When Akbar left BCCI in 1986, he became head of Capcom. Who
owned Capcom? Its controlling shareholders included major BCCI
stockholders like Adham and Khalil, the same people who had been
“victimized” by Akbar’s reckless trading. Why would they willingly
hire Akbar? Moreover, wasn’t it also strange that BCCI continued
to deal with Capcom after Akbar took over, even though he had
presided over the options-trading debacle? Akbar had not even been
fired from BCCI, according to former bank officials. He left of his own
accord and was even allowed to keep his company car and other
benefits.

The treasury fiasco removed one barrier to trying to get a handle on
BCCPs affairs; henceforth the banking group would have only one
auditor. Ernst &c Young (then called Ernst & Whinney), which had
previously audited BCCPs Luxembourg units, insisted that it be given
the whole BCCI group to audit or it would resign. Abedi balked, and

FALSE PROFITS

206 )

the big accounting firm did resign, leaving the whole audit to Price
Waterhouse.

Outsiders, though, still couldn’t learn much from BCCI’s annual
reports. All anyone reading the reports from the mid-1980s would
know was that BCC 1 had lost a total of about $28 5 million in the U.S.
Treasury options market and that new capital had been supplied by an
anonymous shareholder — widely believed to be Sheikh Zayed. That
was a reasonable assumption. Abedi had, in fact, flown to Abu Dhabi
in a desperate attempt to obtain money from Zayed. “At that time, we
were literally stripped of capital,” says Rahman. Soon afterward, $150
million of new capital was injected into the bank. BCCI and its audi¬
tors called this “a shareholder subvention.”

Many years later it was discovered that the money wasn’t from
Zayed or from one of the other sheikhs in BCCI’s shareholder group. It
was not even new capital. The money actually came from the staff
benefit fund, which was part of the 1 CIC group. Without consulting
anyone, Abedi had plundered his staff’s pensions to keep the bank
alive.

The $150 million wasn’t nearly sufficient, so Abedi looked for capi¬
tal from new sources. He soon found some willing investors, the Bin
Mahfouz family of Saudi Arabia, bankers and friends of the ruling
family’s. Significantly, the Saudis — whose very own Adham and
Khalil are suspected of benefiting so greatly from the fraud at BCCI —
were stepping in to rescue Abedi’s ailing empire.

Salim Bin Mahfouz, the patriarch of the family, was a canny banker
whose family came from the Hadrahmut, the southwestern corner of
the Arabian Peninsula. He and his sons own a majority of National
Commercial Bank (NCB), Saudi Arabia’s largest bank, which they run
as a family company. Khalid, the most ambitious and cosmopolitan of
Salim’s sons, had long cherished the ambition of adding a sizable
international arm to the bank. But banking is a sensitive issue in Saudi
Arabia, a theocratic state that pays particular heed to the words of the
Qu’ran and its admonitions against charging interest. The Saudi gov¬
ernment had limited the Bin Mahfouz’s international ambitions to
such a degree that they barely had a foreign presence. This left their
bank ill prepared for the internationalization of financial markets and
the opening up of the Saudi economy, both of which gathered force in
the 1970s.

BCCI looked like a perfect match for the Bin Mahfouz: it had a
network of offices spanning the globe, mostly Muslim management,

( 2.07

False Profits

and a need for capital. The details of the arrangements between BCCI
and the Bin Mahfouz are obscure, but in 1986 the family reached an
agreement with Abedi to buy into the bank and into First American,
with an option and understanding that the investment would be in¬
creased.

The agreement, which gave the Bin Mahfouz family the right to
increase its stake to 30 percent, also involved the Saudi family’s issuing
capital notes of about $300 million or $400 million, which were
redeemable into capital after a certain number of years, according to
Rahman. The Bin Mahfouz also obtained an agreement from Abedi
that was characteristic of many of his understandings with his share¬
holders: he would buy them out at no loss whenever they wished. As
an added sweetener for the Bin Mahfouz family, Abedi deposited $250
million in NCB, according to Rahman and others, raising questions
about how genuine the Bin Mahfouz investment in BCCI really was.
(The Bin Mahfouz have maintained that they made a genuine invest¬
ment and then later sold it.)

The investment achieved Abedi’s desire. It brought in much-needed
cash and gave the prestigious Saudi family an initial stake of at least 10
percent of the bank. The money was immediately put to work to shore
up some of BCCI’s more bizarre accounting. A September 24, 1986,
memo from Imran Imam of the special duties department to Sharaful
Hasan, the manager of BCCI’s Cayman Islands operation, said that
$256.6 million would be credited to the bank’s accounts, divided
between the Cayman accounts of Faisal Saud ai-Fulaij and the ruler of
Ajman, both of them important nominees whose accounts were rou¬
tinely manipulated by Imam and his colleagues. An accompanying
memo, “Appropriation of $US 256.6 million received from NCB,”
breaks down the amounts of money owed to these two accounts,
implying that money had already been temporarily moved to cover the
interest owing on the accounts.

The Bin Mahfouz family even became involved in running BCCI
when Khalid Bin Mahfouz joined the board of directors in 1986. But
he soon became nervous about his new partners and within just a few
months wanted to cut back the investment and end his association
with Abedi. But Abedi and Naqvi needed help to find the money to buy
out the Bin Mahfouz stake. Abedi turned to Zayed, whose Abu Dhabi
Investment Authority seems, according to the bank’s accountants, to
have provided an off-the-books loan to finance the secret buyback of
shares. In addition, the special duties department quietly created fic-

FALSE PROFITS

208 )

titious loans of $213 million in the Bin Mahfouz family’s name to
finance the repurchase of the shares.

With the temporary help of the Bin Mahfouz investment, Abedi and
Naqvi survived the increasing strains of backing the Gokals’ crum¬
bling empire, of huge treasury losses, and of handing out favors to
some of BCCI’s backers in the Persian Gulf. But they had incurred
massive costs: the bank’s books were now a catalogue of manufac¬
tured loans, false profits, hidden loans, and stolen deposits. They had
also plundered the staff pension fund, stealing the future livelihood of
their own employees. And they had had to offer lucrative enticements
to draw in a big new backer.

Keeping the bank going without fraud being detected would remain
a major challenge. It would require a continued huge influx of depos¬
its. And BCCI’s need to use these deposits as it chose meant that the
bank would increasingly turn to depositors more concerned about
secrecy than security. Among those who fit the bill were the drug
barons of Latin America, men who had accumulated billions of dollars
as North Americans and Western Europeans acquired a taste for their
costly merchandise: cocaine.

El Dorado

One day in September 1983, a young American businessman
named Steven Michael Kalish had dinner with two Panamanians dur¬
ing a business trip to Panama City. Cesar Rodriguez and Enrique
Pretelt had impressive political connections, and they arranged for
Kalish to dine the next day at the home of the most powerful man in
the country, General Manuel Antonio Noriega, the head of the Na¬
tional Guard. They suggested that he bring a gift, a normal gesture for
a dinner guest. When Kalish arrived at Noriega’s house, he brought his
host an aluminum Halliburton briefcase, the type used by many pho¬
tographers. The case was not the present, however, but merely the
wrapping. Inside was $300,000 in cash.

Noriega appreciated the gesture, and he reciprocated by providing
valuable assistance to Kalish’s business, which happened to be drug
smuggling. With Noriega’s protection, Kalish transported huge quan¬
tities of Colombian cocaine and marijuana through Panama to the
United States. In addition, Rodriguez helped Kalish launder his drug
money. Kalish would load millions of American dollars onto private
planes, fly the money to Panama, and turn it over to Rodriguez, who
would launder it through his two favorite banks, the government’s
Banco Nacional de Panama and a foreign institution called Bank of
Credit and Commerce International.

Rodriguez wasn’t the only member of this group who used BCCI.
Accounts were opened by Kalish and Pretelt as well as Noriega him¬
self, who channeled tens of millions of dollars through BCCI, much of
it representing payoffs from drug traffickers like Kalish.

The laundering of drug money was not a sideline for BCCI in

( 2.09 )

210 )

FALSE PROFITS

Panama, it was one of the bank’s principal businesses. In fact, money
laundering was a lucrative business for BCCI all over the world.

To international bankers, one of the most mystifying things about
BCCI was its ability to thrive in markets where other foreign banks
found it difficult or impossible to turn a profit. Nigeria, as we have
seen, was one such market. Others were Hong Kong and the UAE.

In 1983-84, the Hong Kong economy was in turmoil. Britain was
negotiating the colony’s future with the Chinese government and many
Hong Kong Chinese began to panic. New investment dried up as
businessmen exported capital to other countries. Most foreign banks
reacted to these economic woes by retrenching, yet BCCI’s Hong Kong
unit expanded to the point where only three of the colony’s 161 foreign
banks had networks as big or bigger. Around the same time, the UAE
was battered by plunging oil prices. Once again, BCCI seemed to
weather the storm much better than other foreign banks. This phe¬
nomenon is captured in the headline of a 1986 article on BCCI’s local
affiliate, Bank of Credit and Commerce (Emirates): “BCCE — A
Growing Bank in a Shrinking Market.”

When BCCI officials were asked to explain such anomalies, they
would make bland remarks about the bank’s “efficient” manner of
operating or its ability to exploit lucrative “niches.” A BCCI official in
Hong Kong, for example, said the bank made money in trade financing
and foreign exchange dealings. The problem with that explanation is
that all the leading banks in Hong Kong were active in those busi¬
nesses.

The banker could have mentioned another niche: money launder¬
ing. The UAE and Hong Kong were major centers for heroin money.
Banks in the UAE catered to traffickers from the Golden Crescent
countries of Afghanistan, Pakistan, and Iran. Hong Kong banks re¬
ceived huge sums from traffickers in the world’s leading opium-pro¬
ducing region, the Golden Triangle, which comprises parts of Burma,
Thailand, and Laos.

One customer was General Khun Sa, a warlord in Burma who was
reputed to control up to 80 percent of the region’s opium trade. (In
1990, he was indicted in the United States on federal drug charges but
remains a fugitive.) In mid-1991, it was estimated that he had depos¬
ited at least $300 million in BCCI. The accounts, according to an
associate of his, were fed from Taiwan and Hong Kong.

BCCI officers in the United States also dealt with heroin traffickers.
One client of BCCI’s Miami branch was a Nigerian drug dealer named

El Dorado

( 2.H

Olutende (“Steve”) Fafowora. In late 1987, a federal jury in Washing¬
ton, D.C., convicted him of racketeering and conspiracy to distribute
heroin. (In March 1989, the conviction was sustained on appeal.)
Fafowora deposited money in BCCI in the name of a company he
controlled, Afro Caribbean Connections. The prosecution called it “a
sham corporation through which Fafowora invested his drug pro¬
ceeds.” Records seized from BCCI “were totally consistent with
money laundering” because all of the deposits were in cash and cash¬
ier’s checks.

The trafficker’s brother, Oladapo Fafowora, happens to be a promi¬
nent figure in Nigeria. In the early 1980s, he was its deputy permanent
representative to the United Nations and later became head of the
Manufacturers Association of Nigeria. He should not, of course, be
blamed for the sins of his brother. But it is worth noting that the two
brothers were the sole owners of the company used to launder heroin
money through BCCI.

Heroin has been overtaken in importance in recent years by another
illegal drug, cocaine. Sales of the white powder generate tens of bil¬
lions of dollars in revenues each year, and the prospect of getting a
chunk of that money encouraged BCCI to embark on a major expan¬
sion into Latin America.

Latin America was the last part of the Third World penetrated by
BCCI when, in 1979, it set up shop in Panama, a major offshore
financial center.* Until 1983, BCCI’s only other sites in the area were
representative offices in Venezuela and Colombia. Meanwhile, other
major banks were opening offices all over the region and lending huge
sums of money to Latin American governments. The lending spree
ended abruptly when the Third World debt crisis exploded in 1982 —
at which point BCCI began its expansion. The timing is easy to ex¬
plain. BCCI wasn’t interested in making loans in Latin America, it
wanted to collect money, including flight capital, deposits from central
banks, loot from corrupt politicians, and cash from cocaine dealers. To
Abedi, Latin America represented a wealth of potential deposits — an
El Dorado to enrich his bank.

*BCCI was active in the Caribbean, however. The Cayman Islands was the site of one
of BCCI’s main holding companies as well as various dummy companies used in connection
with frauds, as we have seen. During the 1980s, the Caribbean presence grew to include
branches in Jamaica (1981), the Bahamas (1983), Barbados {1983), Curasao (1983), and
Trinidad &C Tobago (1986).

Ill

FALSE PROFITS

The man behind BCCTs Latin American expansion was Kemal
Shoaib, one of Abedi’s chief lieutenants. (His family, like Abedi’s, were
Shi’ites from Mahmudabad, India.) His professional credentials were
more impressive than those of most other BCCI executives; he had a
master’s degree in engineering from the Massachusetts Institute of
Technology and had served as president of Pakistan’s Muslim Com¬
mercial Bank. His father, Mohamed, was also prominent in the fi¬
nancial world, having been Pakistan’s finance minister and a senior
aide to Robert S. McNamara when he was president of the World
Bank. Shoaib was assisted by Akbar Bilgrami, a young BCCI officer
who was married to a Colombian and had a good command of Span¬
ish. In the 1970s, Bilgrami had helped to acquire Spanish real estate for
Sheikh Zayed. In 1983, Bilgrami was involved in BCCI’s purchase of a
Spanish bank.

One potential problem for BCCI was its reputation as a weakly
regulated institution. Shoaib’s solution was to hire a man with a solid
reputation to deal with bank regulators: in 1980, he recruited Alberto
Calvo, an Argentine economist who had spent several years as a senior
official of the Inter-American Development Bank. “Calvo,” says a
former BCCI official, “gave [BCCI] tremendous legitimacy and credi¬
bility.” When central bankers expressed concerns about BCCI, says
this source, Calvo reassured them by saying that its dubious image was
based on nothing more than rumors and speculation. In spite of these
soothing words, BCCI broke the law in its first major move into Latin
America.

In 1983, BCCI acquired 49 percent of Banco Mercantil, a twenty-
four-branch Colombian bank later renamed Banco de Credito y Com-
ercio de Colombia. BCCI didn’t buy all the stock because foreigners
were forbidden to hold a majority interest in local banks, but it got
around that restriction through the use of front men. One of the board
members was Rodrigo Llorente, who was one of the most prominent
politicians in the country. He was a leader of the Conservative party, a
former finance minister, and a former president of the central bank.
“There was a [secret] voting trust to show all the power was in the
hands of BCCI,” says a former BCCI official. There was also “a
buy-back agreement saying they can buy the shares back at any time
for one dollar.” 15 ' He adds that “the regulators are always taken in by

*The law was later changed, and in 1985 BCCI “bought” the stock from the nominees,
increasing its stake to 99 percent.

El Dorado ( 213

the big name that’s making the investment, without verifying the
source of the funds.”

BCCI planted three more flags in the region in 1984, opening a
representative office in Sao Paulo, Brazil, a finance company in Uru¬
guay, and a branch in Paraguay. In 1985, BCCI bought a 30 per¬
cent stake in a Buenos Aires bank (increased to 99 percent two years
later).

In 1987, BCCI established a 50-percent-owned Brazilian subsidiary,
with the remaining stock supposedly owned by local investors. In fact,
BCCI used the same strategy it had employed in Colombia: the other
investors were merely front men.

For creating this network, Alberto Calvo expected to be rewarded
with the job of regional general manager for Latin America and the
Caribbean. Instead, the job was given to S. M. Shafi, a Pakistani
banker who had served as head of a BCCI joint venture in the Middle
East, National Bank of Oman. Calvo resigned in early 1988 and went
to work for BCCI’s ally Ghaith Pharaon.* Shaft’s qualifications for the
post were singularly unimpressive. He spoke no Spanish and, accord¬
ing to a former BCCI official, had probably never visited Latin Amer¬
ica. He even had a weak grasp of the region’s geography. Shortly after
his arrival at BCCI’s Latin American headquarters in Miami, a col¬
league mentioned that he had just returned from a trip to Paraguay.
Shafi remarked that the man must be tired after flying all the way from
Africa.

Despite the limitations of Shafi and some of his associates, they were
extremely adept at making political connections in Latin America.
One man who assisted was Andrew Young, who, as noted earlier, was
a paid consultant to BCCI. An internal memo states that Young pro¬
vided “patronage and help” for the bank’s “endeavors in Central
America.” In a few years, BCCI forged relationships with some of the
most powerful people in the region, including Alan Garcia Perez, who
served as president of Peru from 1985 to 1990.

When Garcia was elected president, he was one of the youngest heads
of state in the world — just thirty-five years old. Thanks to his youth
and good looks, he was often compared to John F. Kennedy; like
Kennedy, he projected a progressive image and seemed to embody a

*A few years earlier, Kamal Shoaib had become chairman of Independence Bank in
California, a BCCI satellite owned by Pharaon.

FALSE PROFITS

214 )

new style of politics. Nevertheless, Garcia has been linked to a number
of murky financial transactions, some of which also involved BCCI.
One was a secret arms agreement with France which he is suspected of
having negotiated before he even took office.

One of Garcia’s favorite haunts was Paris, where he had been a
university student, and he took a brief vacation there before assuming
office in July 1985. On his return, Garcia allegedly secretly canceled an
arms deal Peru had made with the French in 1982, substituting a new
agreement. Some of his political opponents have alleged that he nego¬
tiated the new deal during his trip. Under the old agreement, Peru was
to have purchased twenty-six Mirage 2000 jet fighters from a consor¬
tium of French arms companies — Avions Marcel Dassault, Snecma,
and Thomson-CSF. These planes could be signed over only if the
French government agreed. Under the new contract, Peru would buy
only twelve planes; the remainder would be sold to another country.
This was potentially a very profitable deal, for the value of the planes
had soared since the original contract was signed. Peru had agreed to
pay between $12 million and $14 million per plane. It could now sell
them for as much as $30 million apiece.

The surplus planes were sold to Morocco by two Arab arms dealers,
Abdul Rahman el Assir (a former brother-in-law of the Saudi tycoon
Adnan Khashoggi) and his partner Hazem Eissa, according to a con¬
sultant close to the transaction. The two arms dealers, the consultant
says, banked the profits with BCCI.

Garcia’s progressive image was based in part on his willingness to
challenge the international banks. When Garcia took office, Peru owed
$14 billion to foreign creditors, most of it to commercial banks. In a
move that rocked the world financial community, the Peruvian leader
insisted that his country would limit payments on its debts to an
amount equal to 10 percent of export earnings — far less than it was
obliged to pay. The banks responded by cutting off new credit, and
Garcia feared that they would also try to seize Peruvian assets, includ¬
ing funds that the central bank had deposited abroad. BCCI stepped in
with a solution. In 1986, the Peruvians agreed to place central bank
funds in BCCI.

On the surface, this appears to have been a bold act of Third World
solidarity — perfectly in line with Abedi’s rhetoric. In fact, this could
easily have made things worse for Peru, since BCCI was systematically
stealing the depositors’ money as part of its schemes to cover up its
disastrous financial condition. BCCI could well collapse, causing big

El Dorado ( 215

losses to the Peruvian central bank. Some of the Peruvian officials who
agreed to park the money in BCCI may have also had dishonest
motives: BCCI allegedly paid $3 million in bribes to two Peruvian
central bankers to garner the deposits. It was later alleged that Garcia
also accumulated millions of dollars through graft and used BCCI as a
conduit for the funds. He denies the allegations.

While Alan Garcia represented a new style of Latin American politi¬
cian — in form, at least, if not necessarily in substance — the old guard
was personified by Paraguay’s Alfredo Stroessner. An aging army gen¬
eral, he was the epitome of the Latin American candillo and had ruled
his country with an iron hand since 1954, when he seized power in a
coup d’etat. Stroessner, whose father was Bavarian, had a soft spot in
his heart for escaped Nazi war criminals. He had harbored other
fugitives as well, including two deposed Latin American dictators,
Juan Domingo Peron of Argentina and Anastasio Somoza Debayle of
Nicaragua. (Before taking refuge there, Somoza had called Paraguay
“the last place on earth for the worst people in the world.”)

Smuggling was a pillar of the economy. Cigarettes, liquor, and cars
imported to Paraguay found their way to neighboring Brazil. Another
popular racket was the laundering of stolen cars: thousands of auto¬
mobiles stolen in Brazil were taken to Paraguay and “legalized” after
the payment of a small registration fee. The Stroessner regime was also
linked to the drug trade. During the 1980s, U.S. authorities com¬
plained that Paraguay was importing large amounts of chemicals used
to convert coca paste into cocaine, but Stroessner ignored requests to
destroy the chemicals.

This corrupt and impoverished backwater was not the sort of place
likely to appeal to most foreign banks, but BCCI, of course, was not
like other banks. Paraguay was one of the first Latin American coun¬
tries where BCCI set up a branch.

Ghaith Pharaon was also drawn to Paraguay, perhaps because it
was the kind of country where foreign tycoons could easily secure an
audience with the head of state. When he flew to Paraguay in late
1987, his trip was announced in advance in the local press, which
described him as “one of the richest men in the world.” The articles
were based on press releases from Stroessner’s office. Pharaon dazzled
the general with grandiose plans to make major investments in the
country, including a bizarre scheme to build a $300 million Disney-
land-style theme park in President Stroessner City, right near the point

FALSE PROFITS

21 6 )

where Paraguay, Argentina, and Brazil meet. The old caitdillo was
overthrown in 1989 and the theme park was never built.

Pharaon made more progress in Argentina, however, where he built
a Hyatt Hotel in Buenos Aires, bought a jojoba plantation, and, by
1988, was apparently so taken by the country that he applied for
Argentine citizenship. There was at least one false statement in his
application: he claimed to be a major shareholder in BCCI, even
though he had sold his stock in 1986. (Pharaon blames an employee
for the mistake.) He managed to develop ties to some of the most
powerful people in the country. One entree, of course, was Alberto
Calvo, whom he had hired from BCCI. He also did business with
Javier Gonzalez Fraga, a top economic adviser to President Carlos Saul
Menem. The president later named Gonzalez Fraga head of the Argen¬
tine central bank. Before assuming that post, Gonzalez Fraga had been
involved in arranging a complicated debt-equity swap with BCCI
which enabled Pharaon to build the Hyatt Hotel. The deal later
touched off a criminal investigation in the United States. (Gonzalez
Fraga has said there was nothing untoward about his dealings with
Pharaon. “I am not now, nor have I ever been, ‘Pharaon’s man,’ ” he
told an Argentine newspaper.)

The Saudi’s most important link was with the family of President
Menem’s wife, Zulema Yoma. In cultivating the Yomas, Pharaon took
advantage of an ethnic connection, for the Yoma family originated in
Syria, as did Pharaon’s. Members of the family were guests of Pha-
raon’s at parties he held at such tony spots as the jockey club in Buenos
Aires.

During the same period that BCCI and Pharaon were becoming
active in Argentina, the country was emerging as an important trans¬
shipment center for South American cocaine destined for Europe.
Traffickers in Spain would then distribute the drugs all over the conti¬
nent. Pharaon was not implicated in the trafficking, but the names of
some of his Argentine friends came up in a drug investigation by the
Spanish police that began in late 1990. In July 1992, Amira Yoma,
Menem’s sister-in-law and former appointments secretary, was
charged in Argentina with money laundering. She had allegedly car¬
ried suitcases of drug money from the United States to Argentina.

The most important center for the cocaine trade was, of course,
Colombia, and that is where BCCI showed its most impressive growth
in the region. After acquiring its Colombian bank in 1983, BCCI
added seven new branches over the next four years while its total

El Dorado ( 217

assets grew to $213 million. An item in a 1988 issue of the staff
publication, BCC International , boasts:

From small and difficult beginnings in 1983 something of value has
been built in Colombia. The bank has experienced a growth unsur¬
passed in recent Colombian banking history. We are not here only
to take, but also to give and to be responsible members of the society
in which we move. Our present and future are linked to the evolu¬
tion of the city and the country. When Colombia and Bogota pros¬
per, we prosper, if they do not, we do not.

BCCI’s “prosperity” in Colombia was closely tied to the drug trade.
Indeed, that was one of the main reasons that BCCI bought the bank.
“We knew that the money that we would be getting in Colombia
would be drug money,” BCCI’s Abdur Sakhia later said. Two of the
Colombian unit’s branches were in Medellin, the home of the country’s
most'important cocaine kingpins, and BCCI officials aggressively so¬
licited deposits from them. In the words of one U.S. investigator, BCCI
“absolutely and specifically sought out narco money.” He added that
the bank offered counseling to those people and told them how to
invest and cover the money. One client was Jose Gonzalo Rodriguez
Gacha, a cartel leader who stashed millions of dollars in BCCI. An
Interpol report states that seven BCCI employees — one Colombian
and six Pakistanis — gave “instructions as to the administration of his
bank accounts in Luxembourg.”

BCCI was playing a very dangerous game. U.S. law enforcement
authorities had begun to crack down on money laundering, and there
was a constant risk that they would discover what the bank was doing.
In fact, not long after the Latin American expansion began, a former
employee of the bank approached U.S. law enforcement officials with
potentially explosive information about BCCI.

Aziz Rehman, as noted earlier, was a Pakistani immigrant living in
Florida who had been hired by the Miami branch of BCCI in 1982 as a
chauffeur and clerk. He was in a position to observe a great deal, and
what he saw was highly disturbing, including signs that the bank was
engaged in wide-scale money laundering. When BCCI fired Rehman in
February 1984, he contacted the FBI and offered information about
the bank. The bureau referred him to the Internal Revenue Service. In
a series of meetings with IRS agents, Rehman told a fascinating tale,

218 ) FALSE PROFITS

which he repeated years later in a deposition to a U.S. Senate investiga¬
tor.

The manager, Abdur Sakhia, Rehman said, spent much of his time
hobnobbing with politicians, as noted in Chapter 5. Rehman added
that the office handled huge amounts of cash, even though it was not
licensed to do retail banking. Starting in 1983, one of Rehman’s duties
was to transport bags of cash to other banks in Miami — as much as
$700,000 at a time. When BCCI opened a branch in Jamaica that year,
large amounts of currency started arriving from that country. 5 '" The
cash would be brought in by companies like Wells Fargo and Brinks,
and Rehman would take it to other banks in Miami — “sometimes
twice a week, sometimes every second day or third day. In three
months I deposited] about $3 million,” he said.

BCCI customers often made large cash deposits in the Miami
branch — and he was sure that the bank did not fill out currency
transaction reports (CTRs), as federal law required. (A law aimed at
curbing money laundering requires banks to fill out CTRs for cash
transactions of $10,000 or more.) Some BCCI officials, according to
Rehman, took deposits to their homes, “because they want to fly it to
some different places.” He went on: “They fly it to basically Panama
and Grand Cayman” by private plane. The bankers would do this, he
said, when they received large amounts of cash and did not want to
deposit it in the United States, since CTR forms would have had to be
filled out. It appeared to be a very profitable business, according to
Rehman. He said that when the bank took in cash, there was a lag in
the payment of interest to the depositor.

Rehman also described what appeared to be a classic money-laun¬
dering technique: a customer would borrow money in the United
States secured by a deposit in the Bahamas. He added that BCCI
officers in Miami accepted deposits for its Nassau, Bahamas, branch
when no such branch existed. ‘They would take the money from here
and issue a receipt for Nassau, Bahamas, that you deposited the
money, not in Miami, but in Nassau.” To buttress his story, Rehman
gave the IRS agents a pile of documents, including a thick computer
printout of transactions for 1982-84.

The Miami office employed a large number of Pakistanis to do jobs
that Americans could easily have done, Rehman said. His theory was
that BCCI felt it could trust the Pakistanis with the sensitive cash
transactions.

Jamaica is a major exporter of marijuana.

El Dorado

( 2.19

Rehman asserted that BCCI fired him because he had complained
about moving large amounts of cash; he was concerned about his
personal safety. When the bank refused to give him a favorable refer¬
ence, he was unable to find another job for a year and was forced into
personal bankruptcy. He also claimed to have received threatening
telephone calls.

The IRS agents took Rehman very seriously. They held a series of
meetings with him over a period of several months and also gathered
information about BCCI from other sources. In order to go further,
however, they felt they would have to conduct an undercover investi¬
gation of BCCI, which required approval from their superiors in the
agency. But permission was never granted — in spite of repeated re¬
quests — and BCCI continued to launder drug money with impunity
in the United States and other parts of the world for several more
years."'

The IRS’s failure to pursue Rehman’s allegations is particularly strik¬
ing because BCCI’s name popped up repeatedly during the next few
years in drug investigations by the Drug Enforcement Administration
(DEA) and other federal agencies.

From 1984 to 1987, the DEA conducted Operation Pisces, a probe
of Colombian drug traffickers. Undercover agents dealt with Anibal
Zapata, an accountant for the Medellin cartel leader Pablo Escobar
Gaviria. Zapata gave millions of dollars to the agents and told them
where to deposit the money; it turned out that one of his preferred
banks was BCCI. The agents, in the words of one report, “made 80
wire transfers to named and numbered accounts provided by Zapata
at BCCI ... in Panama. The total involved was more than $26 mil¬
lion.”

In a 1985 investigation, the head of an Iranian heroin ring intro¬
duced an undercover DEA agent to a BCCI officer, who explained the
best ways to hide drug money. The Iranian was then investigated by
the IRS, but BCCI was not.

In 1987, a Federal Reserve examination of BCCI’s Miami branch

^Shortly after Rehman approached the IRS, the agency conducted a sting operation that
resulted in the indictment of Shahid Riky, an employee of BCCI’s Chicago office. The probe
was apparently unrelated to Rehman’s allegations. Between April 1985 and August 1986,
according to the indictment, Riky and three other men laundered more than $1.5 million
for an undercover agent. Riky was charged with conspiracy, mail fraud, wire fraud, and
failure to file CTRs and was arrested on September 4, 1986. The charges were dropped in
1987 because of a legal technicality, according to a source close to the investigation.

FALSE PROFITS

220 )

turned up evidence of potential money laundering. The Fed made a
criminal referral to the Treasury and Justice departments, but there
was apparently no follow-up. That same year, the Nigerian heroin
trafficker Olutende Fafowora was convicted on federal drug charges in
Washington, D.C., as noted above. A source close to the case says that
BCCI should have known that Fafowora was depositing dirty money.

It appears that no one at the federal law enforcement agencies asked
why so many traffickers used BCCI. As a result, it was never targeted
for investigation. The U.S. crackdown on money laundering did, how¬
ever, have an effect on the dirty money business. Several launderers
shifted their activities to other countries — where BCCI was ready and
willing to serve them. One such country was Canada, where banks
were not obliged to report large cash transactions.

Between 1985 and 1987, a Canadian lawyer named Patrick An¬
thony Good allegedly laundered about C$7.5 million in cash through
BCCI’s Vancouver branch. About C$3 million was converted to U.S.
dollars, with the rest transferred overseas. To make the transfers, the
lawyer allegedly brought cash into the branch — as much as
C$396,000 at one time — purchased bank drafts, then sent them to
Luxembourg. When Good first went to BCCI, he was asked about the
source of the money, says a Canadian police official familiar with the
case. “He said he was a lawyer [and that they shouldn’t] ask him any
questions. They never questioned him any further and they left it at
that.” He became such a familiar face at the bank that he was soon
accorded privileged treatment — even though he had never opened an
account there. The Canadian police official says that bank employees
would typically find him a seat in a vacant office, pour him a glass of
liqueur, and run the money through a counting machine. Good was
later charged with possession of money that he knew to be the pro¬
ceeds of crime, and he was to be tried with another man in September
1992. (The third defendant was a fugitive.) Just before the trial was to
begin, the prosecutors stopped the proceedings because they were
denied the right to obtain evidence from Luxembourg that they felt
was crucial to proving the case, and the defendants went free.

Panama became another growth center for money laundering, and
BCCI achieved some notable successes there. It not only attracted
deposits from a host of drug traffickers, it persuaded the country’s
dictator to become a customer. The man most responsible for BCCI’s
impressive performance was Amjad Awan.

El Dorado

( 2 .ZI

In many ways, Awan was a typical senior manager of BCCI. Born in
1947 in Kashmir, he grew up in an elite Pakistani family. His father,
Ayub Awan, was one of the country’s highest-ranking police and intel¬
ligence officials. In his late twenties, Awan graduated from Punjab
University with a degree in economics and went to work for an invest¬
ment bank in Pakistan. He later joined United Bank, which was then
headed by Abedi. Awan moved to Britain in 1971 and continued
working for United Bank for five more years. He then joined Interna¬
tional Resources and Finance Bank, a subsidiary of Bank of Montreal,
as vice president of marketing, and he worked in Montreal, London,
and Dubai. It was during this period that Awan became a British
citizen. Along the way, he married the daughter of Asghar Khan, one
of the most prominent politicians in Pakistan."' On December 7, 1978,
Awan was hired by BCCI as marketing manager in its flagship branch
in the City of London.

Around this time, BCCI was seeking permission for a branch in
Panama. One of the people involved was Awan’s boss, Allaudin Shaik,
who managed the Leadenhall Street office. Courting foreign VIPs was
something of a specialty for Shaik; he was one of those who provided
“lavish entertainment” to influential people.

At the time, Panama’s president was Aristides Royo Sanchez, but he
was little more than a figurehead. The real ruler was Omar Torrijos
Herrera, who had come to power in a coup in 1968. Although he was
a dictator, he enjoyed considerable popular support, for he had a
strong populist streak and considerable charm. But there was a less
attractive side to the general. His main power base was his position as
commander of the National Guard, and he bought the guardsmen’s
loyalty by allowing them to enrich themselves through smuggling,
drug dealing, and other rackets. Torrijos’s right-hand man and intelli¬
gence chief, Colonel Manuel Antonio Noriega, was involved in a wide
range of criminality. As far back as the early 1970s, U.S. law enforce¬
ment agencies found indications that he was heavily involved in the
drug business.

One of the Panamanians cultivated by BCCI officials was Guillermo
Vega, the country’s ambassador to London. Vega’s diplomatic qual¬
ifications were slight, but he was very close to Noriega. Shaik and

* After serving as commander in chief of the Pakistani air force, Asghar Khan became a
leading opponent of Premier Zulfikar Ali Bhutto as the head of a coalition called the
Pakistan National Alliance. After the death of General Zia in 1988, Asghar Khan was an
unsuccessful candidate for prime minister.

222 ) FALSE PROFITS

Awan met with the ambassador as well as Panamanian officials who
visited London, including President Royo, General Torrijos, and Colo¬
nel Noriega. Awan was once asked to take President Royo around
London. Awan later recalled his first meeting with Noriega: “He was
visiting London, and we met at a dinner arranged by the ambassador.”
Allaudin Shaik was also at the dinner, and he used the occasion to ask
for Noriega’s help in obtaining a branch license. Not long afterward,
the Panamanian authorities granted BCCI’s application, and the
branch was established in 1979 on Via Espana in Panama City.

The following year, Awan was given the opportunity to head a BCCI
office in one of three countries: Britain, Zambia, or Panama. He chose
Panama and in early 1981 became BCCI’s country manager.

One of the first things Awan did in Panama was to renew his acquain¬
tance with Noriega, who was head of G-2, the intelligence branch of
the National Guard. “I was looking for government accounts,” Awan
later said. “The bank’s object was to obtain deposits from whatever
sources we could, and certainly, that was one of the sources I was
looking at.” Noriega, he explained, “was the only person that I knew
in the armed forces, in the first place. In the second place, I knew that
intelligence services normally do have funds available to place with
banks. I had some knowledge of that fact.”

When Torrijos died in a plane crash in July 1981, Noriega emerged
as the country’s new strong man. The title of president was held by
civilian politicians, but Noriega was generally regarded as the power
behind the throne. He was now an even more attractive prospect to
BCCI, and Awan pressed ahead with his courtship. “I met with him
several times socially and visited his office,” he said, “and asked him to
give some of the Defense Forces accounts to us.”

Awan’s persistence paid off in January 1982 — about a year after his
arrival in Panama. At a meeting in Noriega’s office, the dictator agreed
to open a G-2 account at BCCI and was told that he would have
signatory authority as the head of G-2. “He was the head of intelli¬
gence at the time and told me that this was a secret account, a secret
service account,” Awan said. The account, Awan later said, “was to be
maintained in Panama with full confidentiality, which is one of the
services the bank offered. So, we opened what we called a manager’s
ledger account, which is more or less the same as a numbered ac¬
count.” The banker added, “I was to handle the account, personally.”

Over the next few years, Noriega channeled tens of millions of

El Dorado

( 2.23

dollars into BCCI. The highest bank balance, said Awan, was “in the
region of $20 million — $20 million, maybe $25 million.” Most of the
deposits were in cash, according to the banker, including the first one
of “several hundred thousand dollars.” On January 21, 1982, a few
days after the account was opened, Noriega deposited $45,000 in
cash. Awan later recalled, “I believe it was in bundles of hundred-dol-
lar bills.” Awan has described how he collected the money. “I would
receive a call from General Noriega advising me that a deposit was
going to be made and somebody would then bring in the funds to the
bank,” he said. “On occasion I used to go down to his office and pick
up the funds from him.”

Noriega’s wife, Felicidad, also put money in the account. These
deposits were usually in cash and were as high as a half-million dollars
at a time. “She would normally call me and I would pick the cash up
from her,” said Awan, adding that the money “would be in a bag or a
briefcase or a suitcase.”

Noriega had told Awan that the account was for the military intelli¬
gence service, and some official expenses were charged to it, such as
overseas trips during which Noriega met with foreign officials. But the
dictator and his relatives also withdrew large sums for personal ex¬
penses. For example, BCCI issued VISA Gold Cards to Noriega, his
wife, and his three daughters. The family used the credit cards on
shopping sprees, and BCCI would debit the bank account to pay the
Gold Card invoices.

In 1983, Noriega transferred his account from Panama City to
London because he felt there would be more security there. “The
general,” said Awan, “had expressed a desire that he wanted complete
confidentiality regarding this account, and I think I suggested to him
that it might be a better idea that we transfer it to London, where it
would be far more confidential than it would be in Panama City.”
Members of Noriega’s family also opened accounts at BCCI in Lon¬
don. Cash deposits were still made in Panama, however. Upon receiv¬
ing the funds, Awan would notify his colleagues in London to credit
Noriega’s account.

Over time, the banker and the dictator became close on a personal
level. “It was a banker-customer relationship,” Awan said. “But apart
from that, I think it was a friendly relationship.” The banker was a
guest in Noriega’s home and the two men sometimes socialized to¬
gether. As the friendship grew, so did Noriega’s political power. In
1983, he became head of the National Guard. When a presidential

FALSE PROFITS

22 4 )

election was held in May 1984, the National Guard resorted to vote
fraud to ensure the victory of the general’s candidate, Nicolas Ardito
Barletta.

Awan helped out during the campaign. On a regular basis, Noriega
instructed him to disburse money to certain candidates. A politician
would appear at the BCCI office bearing a note from Noriega indicat¬
ing that he was entitled to a certain amount of money and Awan would
hand over the cash. (A former colleague of his adds that “Awan would
walk around with sackfuls of money. He used to tell me that Noriega
would call him up [at] two o’clock in the morning and tell him to pay
off this one or that one. He would put the money in the boot of his
car.”)

After Barletta took office, he proved to be too independent for
Noriega’s taste and was forced out of office when he agreed to investi¬
gate the murder of Noriega’s critic Hugo Spadafora.*

Noriega’s large deposits in BCCI could not possibly have come from
his official salary. What was the source? Some of the money came from
the U.S. government. For decades, Noriega was on Washington’s pay¬
roll as an informant, and the size of the payments increased in propor¬
tion to his political power. In January 1991, the U.S. government
admitted that the CIA had paid Noriega $322,000 in cash and gifts
over the years, but it is widely suspected that he received additional
money through other channels. The CIA deposited Noriega’s “pay-
checks” into his BCCI account after first channeling the money
through dummy companies. One former BCCI officer says he was told
by a colleague who worked in Panama that Noriega used BCCI at the
suggestion of the CIA.

Another source of money was the drug trade. U.S. authorities, as
noted above, suspected Noriega of being involved with drug traffickers
as far back as the early 1970s. In 1982, investigators for a Senate
committee reported that it was “common knowledge” that the Na¬
tional Guard — led by Noriega — “has ties to and income from vari¬
ous traffickers in drugs, arms, and other contraband.” The investiga¬
tors went on to say that the National Guard “provides warehousing
for narcotics on their way north, assures the release, for bribes re¬
ceived, of drug traffickers arrested, guarantees the nonarrest of offend¬
ers wanted elsewhere who have paid a kind of ‘safe conduct’ fee,

*After Spadafora denounced Noriega, he was abducted by military men and killed. His
headless corpse was discovered in September 1985.

El Dorado

( 225

supervises the air transport of gold, arms, spies bound to and from
North America, Cuba, and Central America.” Between 1982 and
1984, according to a federal prosecutor, Noriega received $10 million
in bribes from Colombia’s Medellin cartel in exchange for protecting
shipments of fifteen to twenty tons of cocaine destined for the U.S.
market. This was just one of several alleged payoffs.

Some of Noriega’s cronies who were involved in the drug trade were
also BCCI customers, including Enrique (“Kiki”) Pretelt and Cesar
Rodriguez. Both men were Noriega’s partners in a variety of busi¬
nesses, including drug trafficking. Like Noriega, they dealt with Amjad
Awan. Pretelt, who owned a chain of jewelry stores in Panama, was
the first to become a client, according to Awan. Pretelt, in turn, intro¬
duced Awan to Rodriguez. In 1983, as we have seen, Pretelt and
Rodriguez brought Steven Michael Kalish to Noriega.

Kalish had started in the drug business in the 1960s when, as a high
school student in a suburb of Houston, he peddled marijuana. He
dropped out of high school in the early 1970s and became a marijuana
importer. After a conviction in Texas, Kalish fled to Florida, adopted
an assumed name, and teamed up with Leigh Bruce Ritch, a young
Tampa native. Together, they set up a smuggling organization and
distribution network. It was a sophisticated operation, replete with
computers, money-counting machines, and private planes — including
a Learjet. From their base in Tampa, Kalish and Ritch smuggled in
huge quantities of drugs from Colombia. Between 1981 and 1985,
they imported 500,000 pounds of marijuana and 3,000 pounds of
cocaine. Ritch has said that the marijuana alone was worth hundreds
of millions of dollars.

By 1983, Kalish “had a Ferrari, a BMW, a Chevy Blazer and more
money than he could handle,” in the words of John Dinges, a biogra¬
pher of Noriega’s. Kalish and his partners collected so much cash that
handling it became a logistical nightmare. “The currency filled entire
rooms,” Kalish later said. “Although we were sending out millions of
dollars to our Colombian suppliers, at one point we had in excess of
$35 million in Tampa. We used money-counting machines, but had to
stop any counting because we could not keep up with the volume.”

One of Kalish’s friends said he knew someone in Panama — a man
named Cesar — who might be able to handle the mountains of cash.
And so, in September 1983, Kalish flew there and contacted the man,
who turned out to be Cesar Rodriguez. The following day, as noted
earlier, Kalish delivered $300,000 to Noriega. Ritch described the
payment as a “security fee,” which made it possible to smuggle drugs

FALSE PROFITS

226 )

through Panama with impunity. The payment was just the first of
several bribes. Over the next several months, said Kalish, “I spent
millions of dollars in Panama to bring myself closer to Noriega.”

The dictator was allowed to use the Learjet owned by the Kalish-
Ritch organization. Noriega, said Kalish, used it “quite extensively on
flights to Washington, D.C., to New York City, to Las Vegas, numer¬
ous flights.” Kalish has said that Noriega eventually “became a full-
scale co-conspirator in my drug operations.” Rodriguez took responsi¬
bility for money laundering, channeling millions of dollars from the
Kalish-Ritch organization into bank accounts in Panama — much of it
in BCCI accounts, where it was handled by Amjad Awan.

Awan may have been skillful as a marketer and a money launderer, but
he had some shortcomings when it came to conventional banking. In
1984, he cleared $3.7 million in checks that turned out to be forged.
He was blamed for the loss, and his superiors decided to transfer him
to a job outside Panama. But Noriega did not want his personal
banker to leave. In fact, he was so upset that he made a personal appeal
to Abedi to cancel the transfer. Awan later recalled that Abedi “told
him no, I had to move, but I would be available to him whenever he
needed me.”

Awan moved to the United States in mid-1984 to work in BCCPs
Washington, D.C., representative office. He would come into contact
with government officials from the United States as well as other
countries, which prompted some colleagues to nickname him “the
ambassador.”

Even though he had left Panama, Awan’s relationship with Noriega
remained close. Noriega provided several hundred thousand dollars in
loans to the banker, making it possible for him to purchase some
expensive real estate in the Washington area. (Awan has said that he
repaid the loans.) He bought a house at 4201 Cathedral Avenue, a
tony address in the northwest quadrant of the capital, which takes its
name from the imposing National Cathedral. The banker later ac¬
quired a house in suburban Bethesda, Maryland, and a condominium.

Awan continued to serve as Noriega’s personal banker, transferring
money from one account to another, paying bills for travel expenses,
and handling other chores for the dictator. On a typical visit to New
York, Noriega would stay at the Helmsley Palace Hotel. (As a welcom¬
ing gesture, BCCI sometimes sent flowers or fruit baskets to the room.)
He would instruct the hotel to send the bill to BCCI’s New York office.
It would pay the bill and then send a memo to Awan asking for

El Dorado

( 2.27

reimbursement. Awan would send a check to BCCI/New York, debit¬
ing one of Noriega’s bank accounts. Since BCCI did not have a branch
in the capital, Awan sometimes channeled money through an account
maintained by the representative office. The account was at a local
bank that had a very cozy relationship with BCCI-First American.

Over the years, dozens of checks representing transfers of Noriega’s
money were cleared by First American. Records show that at least
$500,000 was transferred from Noriega’s BCCI accounts into a BCCI
account at First American. Additional amounts totaling more than
$250,000 were wired simply to “BCCI Washington.” In some cases,
Noriega himself signed letters ordering transfers of funds to First
American. BCCI’s employees made no effort to conceal that they were
channeling Noriega’s money through the U.S. bank: his name was
actually written on the memo line of several checks. On February 13,
1987, for example, Awan and another BCCI officer signed a
$1,814.26 check payable to BCCI’s New York representative office. In
the lower left-hand corner of the check is the word FOR, followed by a
line on which is written “M. Noriega.”

Awan also went to Panama every few months to discuss Noriega’s
finances in person. Noriega met with his banker during trips to the
United States: Awan would fly to New York to see him and stay at the
Helmsley Palace. The banker even organized a trip to Las Vegas for
Noriega and his cronies and flew in to join them.

In August 1987, Awan was transferred from Washington to Miami
to become a marketing officer for Latin America and the Caribbean.
He sold his home in Maryland and paid about $700,000 for a house in
Coral Gables. The house was just one of many symbols of his success.
Awan wore expensive suits and adopted the ostentatious manner of
some of his drug-dealing customers. A former BCCI official describes
him as “a flamboyant, showy, obnoxious bastard.”

Awan also started doing business with a professional money laun-
derer from Tampa — a man who claimed to have access to vast sums
of cash from some of the biggest drug traffickers in Colombia. He liked
to boast that his “clients” were tycoons on the scale of Chrysler’s
chairman, Lee Iacocca — except that “one sells cars and one sells
coke.” Awan soon began socializing with him, just as he had with
Noriega. It was a client Awan should have avoided, for his relationship
with this particular customer would prove disastrous for him and
BCCI.

Trouble in Tampa

Robert Mu sella, a financial consultant in Tampa, had all the
trappings of a successful entrepreneur: a beachfront condominium,
limousines, yachts, and private airplanes. His clients were drug traf¬
fickers, and he made a fortune from laundering their money. In early
1987, Musella decided to open an account at an international bank so
he could serve his customers more effectively. One day, when he was
caught in a traffic jam in downtown Tampa, he glanced around and, he
later recalled, “I just happened to see the sign” on BCCPs local branch.
It was at 100 West Kennedy Boulevard, in the Riverside Plaza Build¬
ing. A few days later, Musella walked in and explained “that I was a
businessman based in the Tampa area with a large number of Colom¬
bian clients for whom I transferred funds.” He opened an account at
the branch and returned four months later to open another account —
at BCCI’s branch in Panama.

In his initial contacts with BCCI, Musella did not say that he was
handling dirty money, but he dropped plenty of hints, and the bankers
indicated that they understood his desire for secrecy. In one conversa¬
tion, Musella recalled, “I was the recipient of what appeared to me to
be a rather well-polished pitch by the officer that he could assist and
the bank could assist in the secret transfers of funds.” He was also
advised to use cash-intensive businesses to hide the source of his
money. One BCCI staff member in Tampa told him, “It’s the dumb
people that get caught.”

Musella soon began depositing checks in BCCPs Panama branch
which represented the proceeds of cocaine sales. One of the checks
contained a mistake: he had written $110,000 in numerals and
$110,300 in words. In late November 1987, a BCCI officer in Panama

( 2.2.8 )

Trouble in Tampa ( 229

named Syed Aftab Hussain telephoned him about the discrepancy. In
the course of the conversation, Hussain suggested that they get to¬
gether to discuss Musella’s business and the kind of services BCCI
could provide.

In early December, they met in Miami. Hussain said that if Musella
was interested in hiding money, he was going about it the wrong way:
checks could be traced back to him. Hussain told him that BCCI could
suggest much more effective ways of concealing the source of the
money. For example, Musella could purchase a certificate of deposit
from BCCI in Luxembourg and then use it as collateral for a loan in
Panama. At another meeting about a week later, Musella stated
bluntly that he was handling drug money. “There are things best left
unsaid, as you told me once,” he said, “and I will discuss this only with
you and never again. . . . Obviously this money comes from some of
the largest drug dealers in South America.”

Eager to assist Musella, Hussain introduced the money launderer to
some of his BCCI colleagues, including Amjad Awan. Over the next
several months, Hussain, Awan, and other BCCI officials helped him
launder $14 million through bank accounts in the United States, Latin
America, and Europe.

The bankers’ trust in Musella was misplaced. For one thing, he had
lied about his name. It was actually Robert Mazur. More important, he
was not a professional money launderer but an undercover agent from
the U.S. Customs Service. Mazur’s dealings with BCCI were part of an
elaborate sting operation aimed at catching drug traffickers and the
crooked bankers who were their accomplices. As the bankers schemed
with Mazur, a tape recorder concealed in his briefcase captured their
incriminating words.

The reaction of Hussain and his colleagues is not surprising. They
were under great pressure from their superiors to bring in fresh depos¬
its so that the bank’s huge losses could be concealed. At a marketing
meeting in New York, for example, bank officers were told that “de¬
posit marketing is the lifeblood of the BCC organization.”

In addition to the financial strains, BCCI was suffering from faction¬
alism, as the so-called technocrats led by Swaleh Naqvi clashed with
the “Gulf group,” the BCCI officers in the Persian Gulf led by Zafar
Iqbal. This dispute was contained for years by the force of Abedi’s
personality, and no one knew what would happen if Abedi were no
longer on the scene. They found out when the BCCI founder was felled
by a serious illness.

FALSE PROFITS

Z30 )

On February 9, 1988, Abedi suffered a massive heart attack and a
stroke at his home near London. He was rushed to Cromwell Hospital,
the BCCI satellite funded by Sheikh Zayed. Abedi’s heart was so
severely damaged that doctors recommended immediate heart trans¬
plant surgery. When Jimmy Carter learned of the banker’s condition,
he contacted a renowned heart surgeon, Dr. Norman Shumway of
Stanford University, and asked him to assist Abedi’s doctors. Shumway
agreed to fly to London. Another noted specialist brought in was Dr.
Charles Rackley, the chief of cardiology at Georgetown University
Hospital in Washington, D.C.

Despite a successful transplant, Abedi remained in very poor health,
and he later suffered more heart attacks. When the severity of Abedi’s
condition became apparent, Naqvi was named acting chief executive
of BCCI. For years he had served as Abedi’s right-hand man. He was
also the chief orchestrator of the Ponzi scheme as well as the account
manipulations and creative accounting aimed at concealing the true
condition of the bank. Although he appeared to be the natural choice,
his ascension provoked open warfare between the technocrat and Gulf
factions. When Abedi was in charge, members of the Gulf faction
“would never take orders from Naqvi,” says a former BCCI official,
because “he had no relationship to any of the Arabs.” When Naqvi
took over, the Gulf faction refused to obey him, resulting in the paral¬
ysis of BCCI’s senior management. In their rebellion, the members of
the Gulf faction were emboldened by their intimate ties to Sheikh
Zayed and other Arab shareholders.

For the most part, the dissension was concealed from the public. On
a few occasions, however, rumblings of discontent surfaced in the
press. In June 1988, Forbes magazine said there was a clash among
shareholders over who would run the bank and that a compromise
candidate had been suggested: Bert Lance! Although Lance denied the
report, his name appeared two months later in The Times of London.
A columnist reported a rumor that Lance was “on the brink of becom¬
ing a senior executive at the Leadenhall Street office of the Bank of
Credit and Commerce International” and “is expected to assume some
of the responsibilities currently being handled by BCCI’s chief execu¬
tive, Swaleh Naqvi.” This rumor may have been a trial balloon floated
by Lance’s allies at BCCI. Nevertheless, it is virtually inconceivable
that regulators would have permitted the discredited Georgia banker
to take a senior post in the bank. Lance says the rumors were “totally
groundless.”

Trouble in Tampa ( 231

Abedi’s illness also raised questions about the ownership of the
bank. Large blocks of BCCI stock were held by two Cayman Island
entities that had been controlled by Abedi: the ICIC Foundation and
the ICIC Staff Benefit Fund. His illness touched off a power struggle
over who would run them now, according to a former BCCI official.
“When Abedi was incapacitated — seemingly permanently — there
was a jockeying for influence,” this source recalled in early 1989. It
seemed most likely that control of the Cayman entities’ BCCI stock
would be given to Naqvi, but other candidates were also mentioned,
including Ghaith Pharaon and Robert Altman.

In an effort to maintain his grip on the institution, Naqvi met with
Zafar Iqbal to try to come to terms with the Gulf faction. Eventually, a
kind of modus vivendi was worked out in which Iqbal would deal
directly with Naqvi and would not have to take orders from any of his
subordinates. It was only a truce, and many people within the bank felt
that Naqvi would eventually be toppled by the Gulf faction or by a
representative of Sheikh Zayed’s. As a former BCCI official put it,
“People said it was a question of time that either Zafar Iqbal will
become president or Sheikh Zayed will take charge.”

Under Naqvi, BCCI’s rampant criminal activity continued just as
before, with vast sums drained from the bank through fraudulent
loans and other schemes. Another form of crime also continued: the
laundering of dirty money, including cash from drug traffickers.

Illegal drugs have long been regarded as one of the most serious
problems in American society, and presidents from Richard Nixon to
George Bush have responded by launching highly publicized cam¬
paigns against drugs. Nixon, whose election in 1968 owed much to
law-and-order campaign rhetoric, declared “war on drugs” shortly
after taking office. Ronald Reagan called for “a national crusade
against drugs, a sustained, relentless effort to rid America of this
scourge by mobilizing every segment of our society against drug
abuse.” The results have been disappointing, partly because the same
presidents supported foreign leaders who were in bed with traffickers,
including Pakistan’s Zia and Panama’s Noriega.

One federal law enforcement official who had no qualms about
offending foreign leaders was William von Raab, who became U.S.
Customs commissioner in October 1981. Von Raab, a New York
lawyer, was utterly unlike the colorless and ultra-cautious bureaucrats
and political hacks who run so many federal agencies. Pugnacious and

FALSE PROFITS

outspoken, he was always ready with a sound bite for reporters on
the drug beat. He was also popular with many conservative Repub¬
licans, notably Senator Jesse Helms, the fire-breathing right-winger
from North Carolina. But his zealotry alienated many administration
officials — as well as officials of drug-producing countries.

One of the most famous incidents of von Raab’s career occurred
after Enrique (“Kiki”) Camarena Salazar, an agent of the Drug En¬
forcement Administration (DEA), was kidnapped in Guadalajara,
Mexico, in 1984. (He was eventually found dead.) DEA officials who
investigated the disappearance complained that they were getting little
cooperation from the Mexican authorities, and they suspected that
corruption was involved. The DEA administrator, Francis (“Bud”)
Mullen, asked von Raab to have Customs agents question people
crossing the border. He replied, “I’ll do better than that. I’ll question
everybody .” The result was a virtual paralysis of travel and trade —
and a major diplomatic row — between the two countries. But von
Raab seemed to produce results. Mullen told him, “Willy, you can’t
believe it. The Mexicans are starting to respond to us.”

Reflecting the style of their boss, Customs agents became increas¬
ingly aggressive in the drug war. In addition to targeting smugglers —
a traditional task of Customs — agents began to investigate money
launderers. In July 1986, the Tampa office of the Customs Service
launched an undercover operation aimed at catching launderers, Op¬
eration C-Chase.*

Customs agents would pose as professional money launderers
and — if all went well — drug traffickers would take the bait. Al¬
though the concept itself was straightforward, the scheme was fraught
with potential pitfalls. The agents would have to put on a convincing
show, yet they could not engage in entrapment. (The case would fall
apart if a court ruled that government agents went too far by inducing
the defendants to commit crimes they weren’t predisposed to commit.)
There were also considerable personal dangers. Like a professional
actor, the lead agent would have to create a new identity for himself. If
he were spotted as a phony, he might be killed. The risk of detection
was heightened because the agent would be carrying a concealed tape
recorder much of the time.

The Tampa office of the Customs Service assembled a team of agents

*The name was derived from Caliber Chase, an apartment complex where one of the
undercover apartments was located, according to Robert Mazur.

Trouble in Tampa ( 233

to carry out the sting. They would later be assisted by agents from the
Internal Revenue Service (IRS) and, to a lesser degree, the FBI and the
DEA. When the laundering spread to Europe, the Customs agencies of
Britain and France would also join the investigation.

Robert Mazur, the star of this dangerous drama, was a veteran federal
agent who had taken part in several undercover operations over the
years. He grew up on Staten Island, New York, where his schoolboy
sport was wrestling. After earning a degree in business administration,
he joined the IRS in 1972 as a special agent in the Criminal Investiga¬
tion Division. He was based in Manhattan and began doing under¬
cover work early in his career. In 19S3, he transferred to Customs,
working out of New York and then Tampa. With his black hair and
dark complexion, he easily passed for an Italian American, which
helps explain the pseudonym Musella.

Mazur set himself up as the head of a firm called Financial Consult¬
ing Inc. and assumed a lifestyle commensurate with the successful
image he wanted to project. Through an informant, he made his first
important contact: a Colombian money changer named Gonzalo
Mora, Jr., who handled cash for cocaine dealers. Mazur convinced
Mora that he was in a position to collect and launder the money
discreetly, thanks to his connections with businesses that handled large
amounts of currency, including airlines and jewelry stores. He claimed
to have ties to a brokerage firm with a seat on the New York Stock
Exchange, and he sometimes hinted of connections to New York
mafiosi.

As Mora grew to trust Mazur, he arranged for the undercover agent
to pick up hundreds of thousands of dollars in cash from drug sales all
over the United States. Later, Mazur and his colleagues would handle
millions. They would deposit the funds in cooperating American
banks and issue checks to Mora. The checks would then be cashed by
money changers in Latin America, with the funds turned over to
Colombian drug dealers. The laundering operation grew even bigger
in early 1987, when Mazur attracted other clients, including Roberto
Alcaino, a Chilean who ran a jewelry store in Los Angeles. “The
Jeweler,” as he was called, handled millions of dollars for Colombian
traffickers.

At a certain point, Mora suggested that his friend set up an account
with an international bank so that he could do business in Panama. So,
as we have seen, Mazur started dealing with BCCI. He and his col-

FALSE PROFITS

2 34 )

leagues would deposit Mora’s cash in U.S. bank accounts, wire the
money to BCCI/Panama, and then issue checks to Mora.

Mazur’s first important contact at the bank was Syed Aftab Hussain,
the BCCI officer in Panama who met with him in December 1987. The
following month, Hussain introduced the agent to two of his col¬
leagues in Miami, Amjad Awan and Akbar Bilgrami. Years before,
Bilgrami had managed some of Sheikh Zayed’s investments, as we
have seen. He also helped establish BCCIs Latin American network.

In his first meeting with Awan, Mazur made it clear that he was
handling drug money. “The people with whom I’m dealing,” he said,
“are the most powerful and largest drug dealers in Colombia.” Awan
didn’t balk. He sold the agent a $1.1 million certificate of deposit,
which would be used to secure a loan from BCCI/Panama.

Panama’s growing notoriety as a money-laundering center soon
prompted BCCI officers to suggest that Mazur start washing his funds
in other financial centers. In a June 1988 conversation, Awan boasted
to Mazur that he could launder as much as $10 million per month in
U.S. currency if it were delivered to London. Mazur took the advice
and started channeling money through London, Paris, Geneva, Lux¬
embourg, Uruguay, and the Bahamas. In the Bahamas, he dealt with
BCCI’s country manager, Saad Shaft, whose father, S. M. Shaft, was the
bank’s Latin American chief.

As the operation spread, Mazur was introduced to one BCCI officer
after another. In nearly every case, he repeated that he was handling
dirty money and the bankers were happy to assist. In Paris, Mazur was
lavishly entertained by BCCI. The bankers transferred much of the
drug money through institutions with close ties to BCCI, including
BCP, its Swiss bank, and Capcom Financial Services, the commodity
futures firm in London run by Syed Ziauddin Ali Akbar. Money was
also wired through an American bank with very close ties to BCCI —
First American. 51 *

Of the $14 million in drug money laundered by BCCI, nearly half
was transmitted through First American. Starting on January 26,
1988, there were seven transfers of funds through First American Bank
of New York, totaling $6,870,510.

Thanks to his dealings with Mazur and Noriega, Awan was becoming
one of the most successful marketers in BCCI’s history, a man who had
been able to attract millions of dollars in deposits. He was also in grave

*No evidence has emerged that First American’s employees knew it was drug money.

Trouble in Tampa ( 235

danger — not only because of C-Chase, but because law enforcement
authorities were closing in on many of his clients. Customers from his
Panama days were being indicted, arrested — and worse.

Steven Michael Kalish had been arrested in Tampa in July 1984, and
his partner, Leigh Bruce Ritch, was picked up in 1986. That June, both
men were indicted on federal drug charges in Tampa. Ritch was con¬
victed the following year and sentenced to thirty years in prison with
no possibility of parole. Kalish’s lawyer made a deal with the Justice
Department: in exchange for a reduced sentence, Kalish pleaded guilty
and agreed to tell the prosecutors everything he knew about Noriega.
Cesar Rodriguez’s fate was far worse. In March 1986, his corpse was
found in a village near Medellin, Colombia. His arms were tied behind
his back, his tongue was cut out, and he had been shot through the
head.

Noriega himself — the man who had protected Kalish, Ritch, Ro¬
driguez, and other traffickers — was increasingly in danger. After
supporting him for years, the U.S. government began to turn against
the dictator. Noriega had long been a valuable asset to Washington,
but he was no longer reliable. In various disputes in the region, he
seemed to be playing both sides — helping the Americans but also
cozying up to left-wing elements. His involvement in the drug trade
was also worrisome. The United States had ignored this for many
years, but Noriega had become too brazen by taking huge payoffs
from the Medellin cartel.

As part of a campaign to undermine the Panamanian strong man,
officials in President Reagan’s National Security Council (NSC) leaked
negative information about him to the press. Based in part on these
leaks, the investigative journalist Seymour Hersh published a lengthy
expose in the New York Times. The first article, headlined “Panama
Strongman Said to Trade in Drugs, Arms and Illicit Money,” appeared
on June 11, 1986 — the same day Noriega traveled to Washington for
an official visit. Awan was with him when the story appeared. The
banker later recalled that “we were traveling together from New York
to Andrews Air Force Base [near Washington]. He had a copy of the
newspaper with him. He was agitated and upset.” But the embarrass¬
ing article did not deter Noriega from making his rounds. He called on
several American officials, including Oliver North of the NSC and
William Casey of the CIA.

In February 1988, federal grand juries in Miami and Tampa indicted
Noriega. He was charged with drug trafficking, laundering drug
money, and providing assistance to traffickers in exchange for millions

FALSE PROFITS

236 )

of dollars in bribes. Leon Kellner, then the U.S. attorney in Miami, said
that Noriega had “utilized his position to sell the country of Panama to
drug traffickers.” The names of BCCI customers were sprinkled
throughout the Tampa indictment, which was based heavily on testi¬
mony by Steven Kalish. It charged Noriega with taking $4 million in
payoffs from Kalish and Ritch to protect their drug operation. Indicted
with Noriega was Kiki Pretelt, who had helped introduce Kalish to
Noriega. (Pretelt eventually pleaded guilty and agreed to testify against
the dictator.) Several months later, a prosecutor revealed that Awan
was an unindicted co-conspirator because of his role in handling drug
money from traffickers connected to Noriega.

At BCCI, Noriega’s status as a customer was widely known. Al¬
though Awan had assured his client of confidentiality, few precautions
had been taken. Noriega’s name appeared in hundreds of internal
BCCI documents — including bank statements, checks, telexes, and
memoranda. Documents mentioning his name were seen by employees
in London, Washington, New York, and other cities.

It appears that neither Awan nor any of his superiors took steps to
distance BCCI from Noriega after the indictments. On the contrary,
the bank came to his aid. Days after the indictments were announced,
Noriega told Awan he wanted to close the accounts in London that
had been opened for him and his family and transfer the money to
safer havens. Awan discussed the matter with Swaleh Naqvi.

At the time of the indictments, Noriega had $8 million on deposit in
personal and corporate accounts at BCCI and $15 million in a Pana¬
manian Defense Forces account. All of that money was in London, and
he feared that U.S. authorities would be able to seize it. At Noriega’s
instructions, BCCI transferred the $23 million to a BCCI account in
Luxembourg. The money was later shifted to other European banks in
order to obscure the trail. One of those institutions was Union Bank of
Switzerland, a part owner of BCCI’s Swiss bank, BCP. For additional
security, the deposits were held in the name of the government-owned
Banco Nacional de Panama.

Shortly before the Noriega indictments were announced, the Senate
Permanent Subcommittee on Investigations conducted hearings on
Noriega, and one of the witnesses was Steven Michael Kalish. He
appeared on January 28 and talked at length about his relationship
with Noriega but also made some references to BCCI. At one point he
referred to an aircraft deal with the general which involved the with-

Trouble in Tampa ( 237

drawal of $500,000 from a Kalish account at BCCI. His partner, Leigh
Bruce Ritch, appeared before another congressional committee eleven
days later, the Subcommittee on Terrorism, Narcotics, and Interna¬
tional Operations of the Senate Foreign Relations Committee, chaired
by John F. Kerry of Massachusetts.

At the time of the hearing, Kerry was not regarded as a political
powerhouse. He was relatively young (forty-four) and a newcomer to
the Senate, having been elected in 1984. His credentials were impres¬
sive. Kerry was a graduate of Yale with a law degree from Boston
College and was a highly decorated Vietnam veteran. After his dis¬
charge from the navy, he became a prominent antiwar activist as
national coordinator of Vietnam Veterans Against the War. Before his
election to the Senate, he served as a prosecutor and as lieutenant
governor of Massachusetts. In Washington, however, Kerry was over¬
shadowed by the state’s far more famous senior senator, Edward M.
Kennedy, who had served since 1963. Adding to the identity problem
was that Kerry was sometimes confused with another Democratic
senator, Bob Kerrey of Nebraska.

But Kerry was by no means a lightweight. It would just take time for
him to find the right issue to make his reputation. BCCI turned out to
be that issue.

Ritch told the Kerry Committee that he had dealt with the Banco
Nacional de Panama and BCCI and that he had been referred to those
banks by Noriega’s friend Cesar Rodriguez. Kerry then asked him,
“Was this [BCCI] a bank favored by General Noriega?” Ritch replied,
“Having been recommended by Cesar Rodriguez, I would say yes, sir.”
BCCI’s name came up the following day in testimony by Jose Blandon,
a former Panamanian diplomat who had turned against Noriega. He
told the Kerry Committee that BCCI “was used by Cesar Rodriguez
and is used by Pretelt for money laundering.” He added, “It is a bank
where normally Noriega carries out his international operations, so it
is a very — it’s a bank that would be very interesting to study.” A
committee staff member, Jack Blum, later recalled that Blandon “put a
chart up that showed what he called Noriega’s criminal empire and at
the center of the chart he had BCCI.”

Blandon’s remark — that BCCI would be an interesting bank to
study — was taken to heart by the committee. In the following weeks,
the staff launched an intensive investigation of Noriega and his deal¬
ings with BCCI. The committee’s point man was Jack Blum, a forty-
six-year-old lawyer who had spent most of his professional life on

FALSE PROFITS

138 )

Capitol Hill chasing all manner of villains — from bribe-paying multi¬
nationals to Latin American drug pushers. With a roly-poly figure and
rumpled suits, Blum does not fit the stereotype of the sleuth, but he
proved to be more of a threat to BCCI than any other investigator the
bank had encountered.

Blum was born in 1941 in the Bronx and raised in Elizabeth, New
Jersey. His father was a doctor and his mother, a teacher. He attended
high school at an orthodox yeshiva in Manhattan and then enrolled in
Bard College. There, according to a profile of Blum,

he came under the powerful influence of two refugees from Nazi
Germany, philosophy professor Heinrich Bluecher and his wife,
Hannah Arendt, whose “Origins of Totalitarianism” was already a
classic and who was then at work on “Eichmann in Jerusalem.”

“I spent time in their apartment in New York, where W. H. Auden
and Mary McCarthy were regular visitors,” he recalls. “I remember
they were so worried about Auden, because he lived this derelict life,
so the two women [Arendt and McCarthy] went to the Lower East
Side and cleaned his apartment.”

After graduation, Blum obtained his law degree from Columbia in
1965 and then went to Washington. After a stint at the Federal Com¬
munications Commission, he became a congressional staff member.
Corporate skulduggery was one of his principal areas of interest. As a
member of the late Senator Frank Church’s staff, Blum investigated
ITT’s activities in Chile and the bribery of foreign officials by
Lockheed and other multinational corporations. He also probed In¬
vestors Overseas Services, the mutual fund group that was taken over
and looted by Robert Vesco. Blum went into private practice in 1976,
returning to Capitol Hill in 19S7 to work for Senator Kerry as special
counsel to the subcommittee on terrorism and drugs.

Initially, Blum investigated allegations that the contra rebels in Nic¬
aragua, backed by the United States, were involved in drug trafficking.
He soon began to take a broader look, collecting evidence that govern¬
ment officials in several countries in the region were involved in the
drug trade, most notably Noriega.

BCCI was not an unfamiliar name to Jack Blum. He had heard of the
bank a few years earlier, when he was in private practice. A client was
planning to do business with Attock Oil, a BCCI satellite, and the
bank’s name came up at a meeting with officials of Mellon Bank in
Pittsburgh. “We sat down with Mellon Bank and said that the party on
the other side of the transaction was affiliated with BCCI,” Blum

Trouble in Tampa ( 239

recalls. “And the entire senior international staff at Mellon just about
threw up on the table. They would not accept under any circumstances
letters of credit from BCCI. I later found out that almost none of the
serious banks I talked to were interested in doing business with
them — and they wouldn’t say why.”

After several witnesses close to Noriega fingered BCCI as his favor¬
ite bank, Blum decided to take a look at the institution and started
making calls to some of his contacts. One friend told him that a mutual
acquaintance of theirs had worked for BCCI; when Blum called him,
the banker agreed to meet. Over the course of a day and a half, the
banker told Blum an amazing tale. BCCI appeared to be the ultimate
“hot money” bank, in Blum’s words, an institution dedicated to col¬
lecting and laundering every conceivable type of dirty money, includ¬
ing loot from corrupt politicians and cash from cocaine dealers. This
confidential source “laid out all the problems that were going on. He
told me about Awan. He told me about Awan’s relationship with
Noriega. He told me about the bank in Colombia and [its] dealings
with the [cocaine] cartel. He told me about Pharaon being a front — a
dummy shareholder. And he told me about BCCI’s [relationship with]
First American.”

On March 22, Blum circulated a memo to all the members of the
Foreign Relations Committee, asking for the authority to subpoena
BCCI records and to compel testimony from two BCCI officials. A few
days later, the committee voted to issue the subpoenas. When Justice
Department officials learned about the Kerry Committee’s probe, they
feared that it could compromise Operation C-Chase and asked the
committee to delay its investigation. “We were in a very difficult
position,” Blum recalls, “not wanting to screw up a major undercover
operation.” Justice later gave a green light and the subpoenas were
issued at the end of July.

BCCI was “commanded” to produce a vast number of documents,
including all records relating to Noriega and companies controlled by
him. The bank was also told to produce two witnesses: S. M. Shafi, the
head of the Latin America region, and Khalid A. Awan. The latter
name was garbled because Blum did not know the banker’s first name;
he picked an Awan out of a Florida telephone book who turned out to
be the wrong person.

When BCCI officials learned that the bank was the target of a Senate
investigation, they turned to the Washington lawyers who had played
an important role in the bank’s affairs for more than a decade, Clark

FALSE PROFITS

24O )

Clifford and Robert Altman. The first thing Clifford did, Blum recalls,
was to call Senator Claiborne Pell, the chairman of the Foreign Rela¬
tions Committee. Pell, a patrician Yankee from Rhode Island, is a
gentleman from the old school — not the sort of person likely to resist
a reasonable request from a distinguished attorney like Clifford. It
didn’t hurt, of course, that the two men had been friends for years.

Clifford “requested an extension,” Blum recalls, “and got that ex¬
tension put in the middle of the August recess.” He also tried to limit
the scope of the inquiry to Noriega, according to Blum. Clifford
“wanted very much to prevent a wide-ranging discussion of what was
afoot.” In addition, Clifford and Altman tried to discourage the com¬
mittee from talking to Amjad Awan; “they said Awan’s life was at
risk,” according to Blum. Clifford also met with Senator Kerry and
used the occasion to vouch for BCCI. “He saw Kerry and said what a
terrible thing this was — that he’d known the BCCI people for a long
time and that they were people of repute.”

A far different picture was emerging from Blum’s investigation.
The lawyer continued to receive disturbing information about BCCI.
Among his sources were current and former employees — including
two of the principal targets of Operation C-Chase.

Shortly after the Senate’s subpoenas were issued, Blum received an
anonymous call from a woman with a British accent suggesting that he
talk to “Ali Akbar” — a reference to Syed Ziauddin Ali Akbar, the
head of Capcom. “So I picked up the phone and called him,” Blum
recalls. “And Akbar says, ‘You want to talk to me about BCCI? I’ve
got a lot to say. Fax me a letter.’ ” Blum responded immediately,
inviting Akbar to discuss “certain international banking issues.”

Akbar had explosive information about BCCI. When he ran the
bank’s treasury department — and later, as the head of Capcom — he
was involved in the fraudulent trades in the futures and options mar¬
kets through which a huge volume of depositors’ money was siphoned
out of BCCI. What would he say?

A few days after the phone conversation, says Blum, “Akbar turns
up in my office.” He was “exceedingly dapper, incredibly well tailored.
Very well spoken. Very gentlemanly. I took him to be surprisingly
young for being the self-described head of a commodity trading com¬
pany with offices in London and Chicago. We talked about BCCI, we
talked about its capitalization, and I said I knew that there were some
strange things in the books. And he said, ‘Ah, you mean the capital
problem.’ ”

Trouble in Tampa ( 241

Akbar also told Blum that the U.S. Marshals Service had served the
Senate subpoena on the wrong Mr. Awan. What is more, recalls Blum,
he said that “lawyers for BCCI are trying to tell [Awan] to leave the
country so he won’t have to be served with a subpoena.” Akbar added
that he was a friend of Awan’s and might be able to arrange for Blum
to meet him. He would be going to Miami soon and would talk to the
banker.

About a week later, Akbar agreed to meet with Blum and another
committee staff member at the Intercontinental Hotel in New York.
“It was one of the most oppressively hot summer days in my memory,”
says Blum, “and this man comes breezing into the lobby for lunch —
absolutely crisp. He came in and sat down and said, Tve got wonder¬
ful news. I’ve met with Awan and he wants to cooperate.’ ” In the
course of the lunch, Akbar also talked about BCCI’s problems in India
and Kenya, where the bank had been accused of violating foreign
exchange controls. He teased Blum with indications of the mess inside
the bank and its involvement in questionable activities but did not
reveal the rampant fraud.

Blum was nonetheless surprised by Akbar’s willingness to go that
far — and to fly to the United States at his own expense. Years later, he
learned of a possible explanation. Akbar allegedly told senior BCCI
officials that he was thinking of cooperating with Blum and used this
threat to extract hush money from the bank. If this allegation is
correct, silence was golden: Akbar got a $30 million payoff, according
to BCCI’s auditors at Price Waterhouse. Akbar, says Blum, had com¬
puter disks that “would have laid out in detail the fraud at the heart of
the bank.”"'

Akbar did help Blum get in touch with Awan, who agreed to come
up to Washington to see him. They went to the lawyer’s home in
Maryland and discussed BCCI for about eight hours. Like Akbar,
Awan strove to appear helpful by providing tantalizing bits of in¬
formation about BCCI, but he revealed only a fraction of what he
knew.

At the same time that Akbar and Awan were providing information to
the Senate, they were becoming ensnared in the Customs Service’s sting
operation. Both men were completely duped by Robert Mazur’s

*Some BCCI officers disagree with this version of events; one says he believes that the
payment to Akbar was really to help boost the capital of Capcom or to transfer more money
to the company as a way of taking it out of BCCI. Akbar has denied that he was bribed.

FALSE PROFITS

2 4 2 )

facade. The Customs agent had an extraordinary gift for winning the
confidence of the people he was investigating. At one point during
C-Chase, the money launderer Roberto (“the Jeweler”) Alcaino was
arrested for smuggling cocaine, thanks to a tip from Mazur. Alcaino, in
the words of one journalist,

turned to the friend he most trusted to help his wife hide an emer¬
gency cache of funds. He turned to the man he knew as Robert
Musella, a.k.a. Robert Mazur.

“When you become very close to a person,” Alcaino testified after
pleading guilty, “you consider them a friend, so you talk about your
wants and needs and the things that you have done and what you
are planning to do. That’s why I’m here today.”

Awan was a man who — to paraphrase Will Rogers — never met a
money launderer he didn’t like. He developed such a close relationship
with Mazur that he would gossip about BCCI, outline his plans for the
future, and even discuss his relationship with Noriega. In these conver¬
sations, Awan revealed one of the darkest secrets of BCCI — its covert
ties to U.S. financial institutions.

Early in their relationship, Awan boasted to Mazur that the BCCI
group could well be much bigger than it appeared. In January 1988, he
casually mentioned that First American was “unofficially owned by
us” but did not go into detail. Two months later, he indicated that
BCCI had been close to both First American and National Bank of
Georgia. The following September, Awan went into greater detail
about BCCFs ties to First American and the men who ran it, Clark
Clifford and Robert Altman.

Friday, September 9, 1988, was a hot and humid day in Miami as
Awan arrived at the Grand Bay Hotel in Coconut Grove to meet with
Mazur. Awan took a seat and waited for his friend, who appeared
shortly after five p.m. Mazur ordered a Scotch and water, and the two
men settled down for a chat. The conversation began on a light note as
they talked about Awan’s grueling travel schedule. When Mazur said,
“You must be a stranger at home,” Awan joked that “even the dogs
don’t recognize me,” and both men laughed.

The conversation soon took a more serious turn. They talked briefly
about Mazur’s dealings with BCCI, and Awan told his friend about the
Kerry Committee probe. The committee had served a subpoena on the
bank, demanding information on its activities in Panama. The princi¬
pal target, of course, was Noriega. As he put it later in the conversa¬
tion, “I’m the only guy who knows Noriega’s activities, his accounts,

Trouble in Tampa ( 243

his, uh, what he has, what he doesn’t have.” The investigation posed a
serious dilemma, he explained. If he failed to cooperate, the Senate
could make life difficult for him. If he did cooperate and Noriega
learned about it, his life could be in danger: “If I say anything about
Noriega and it’s reported by the press, I’m dead. He’s gonna kill me.”

As Awan unburdened himself, Mazur’s concealed tape recorder cap¬
tured one startling statement after another. He suggested that BCCI,
Clifford, and Altman were trying to impede the committee’s investiga¬
tion by moving him out of the country — a remark that jibed with
what his friend Akbar had told Blum. On September 3, six days before
this conversation, Altman “suggested to the bank that I should be
immediately transferred from the U.S. to Paris,” Awan said. BCCI
took the advice, “so they duly transferred me to Paris.” (Altman has
denied giving such advice.)

Awan told Mazur he didn’t agree with the transfer. “As long as I am
an employee of the bank, I can be anywhere, I can, I can be in Tim¬
buktu, if they throw a subpoena on me, they can demand that the bank
produce [me]. And if they don’t, they can do what they did to [Bank of]
Nova Scotia. They can fine them $100,000 a day or whatever.”"'
Ultimately, Awan said, he agreed to be questioned, although he in¬
sisted that it be done secretly so that Noriega would not find out. Awan
said he told the committee, “I want to make a deal with you, that
whatever I say should be in executive session, and not in open ses¬
sion.” He also retained his own lawyer because, he said, he did not
trust Clifford and Altman.

Awan then dropped another bombshell: he explained why he did
not trust the two lawyers. He said that Clifford and Altman ran a bank
in Washington called First American, that he suspected that it was
secretly owned by BCCI, and that the lawyers could be “screwing”
BCCI as part of a scheme to take over First American.

awan: It might be farfetched, it might sound stupid, but my assess¬
ment is that we own a bank in Washington. I may have mentioned
it to you before.

mazur: That you what?

awan: We own a bank, uh, based in Washington, it’s called the First
American Bank. The holding company is in Washington, and

*In 1983, a U.S. court imposed a fine on Bank of Nova Scotia, one of Canada’s largest
banks, for contempt when it refused to turn over records from its Bahamian branch. When
the judge increased the fine to $15,000 per day, the bank capitulated.

FALSE PROFITS

2-44 )

there are five hanks actually. First American of New York, First
American of Washington, D.C., First American of Virginia,
Maryland, Tennessee, and Georgia. There’s six banks. . . . BCCI
was acting as adviser to [the shareholders], but the truth of the
matter is that the bank belongs to BCCI. Those guys are just
nominee shareholders.

mazur: Uh-hum.

awan: Clark Clifford and his, uh, law partner Robert Altman are
the chairman and capital holders. I personally feel it would suit
them if BCCI withdrew.

mazur: Ah hah.

awan: And they just take over that entire part of the bank. I
wouldn’t be, I mean because Altman is a young man. He’s very
ambitious. He has political aspirations. And being a bank presi¬
dent is, you know, is, it’s not just being another Washington
lawyer. ... I wouldn’t be at all surprised if, you know, if they’re
totally screwing BCCI to take over this bank.

The same day Awan had that conversation with Mazur, Robert
Altman went to Capitol Hill to meet with the Kerry Committee’s staff
regarding the documents it had subpoenaed. Altman said that BCCI
did not have any documents in the United States relating to Panama¬
nian bank accounts. But Blum did not believe him — his own sources
at BCCI had told him such records did exist.

On September 14, Altman began delivering BCCI documents to the
Kerry Committee, and these records gave a highly misleading impres¬
sion of the bank’s relationship with Noriega. The papers suggested
that the bank had done little more than handle routine transactions for
Noriega and that the relationship had ended when he was indicted in
February. Thousands of pages of documents that would have given a
true picture of the relationship were withheld, including records that
would have shown that the bank had moved some of Noriega’s money
to Luxembourg after the indictment.

Blum also received disturbing reports that the bank was systemati¬
cally destroying records. His BCCI sources, Blum later said, began
calling him to say “that Mr. Naqvi had flown over from London and
the documents had been shipped up from Miami and were being
shredded in the Washington office, that there was a team of people at
work shredding documents that were due us under the subpoena.”
When Blum contacted Altman about this, Blum said, he “assured me

Trouble in Tampa ( 24 5

nothing like that could be going on.” Nevertheless, Blum’s informa¬
tion was correct. In a conversation with Mazur that same month,
Awan said that the bank was destroying records that the Senate
wanted. (Years later, Abdur Sakhia, BCCI’s top official in the United
States, testified that papers related to Noriega were sent from Miami to
London after the bank received the Senate’s subpoena.)

At the same time BCCI was withholding and destroying documents,
its attorneys were continuing to vouch for the bank. On September 26,
Clifford met with Senator Kerry to discuss the production of BCCI
documents. At that meeting, Kerry later recalled, Clifford told him,
“This is a good bank.”"*

As Awan worried about how he would respond to the Kerry Commit¬
tee, he decided to leave BCCI and resigned in mid-September. His plan
was to join his friend Syed Ziauddin Ali Akbar of Capcom Financial
Services. Awan and Bilgrami would set up a Capcom affiliate in Miami
and bring some BCCI customers with them — including Noriega. In
August, the banker had traveled to Panama to meet with Noriega and
discuss the movement of his funds. “He wanted me to send the money
back to Panama in the first place,” Awan later said, “and then possibly
get it out of there, as well as into another place in Europe.” Awan later
transferred some of Noriega’s money from European banks to Cap¬
com.

Awan also planned to channel some of Mazur’s drug money to
Capcom. Shortly after Awan resigned from BCCI, Mazur went to
London and met with Akbar. Again, the agent made it clear that he
was handling drug money. In a conversation on September 21, Mazur
said that his clients “are extremely professional. If they were in a room
with Lee Iacocca, you would think that they were on the board of
Chrysler. The only difference is that Lee Iacocca sells cars in the U.S.

^Clifford’s own integrity was being called into question at precisely this time. Former
minority shareholders of First American Bank of Virginia had sued First American Bank-
shares, Clifford, and other defendants for allegedly misleading them when the parent
company bought them out. When the trial was held in U.S. district court in Alexandria,
Virginia, in September 1988, the jury heard evidence that an “independent” appraisal of
the value of the bank stock was anything but independent. First American told a Wall Street
firm it was willing to pay $42 per share, and then asked the firm to appraise the stock. The
firm was also told that if First American decided to go ahead with the buy-out, the
brokerage firm would be hired to handle the tender offer. Not surprisingly, the brokerage
firm said the stock was worth $42 per share. The jury ruled for the plaintiffs, and an appeals
court sustained the verdict. The U.S. Supreme Court reversed the verdict on technical
grounds.

FALSE PROFITS

246 )

and these guys sell cocaine in the U.S.” After that meeting, Mazur
wired drug money from BCCI to Capcom.

Ultimately, Awan decided to cooperate with the Kerry Committee.
But he did not inform BCCI and he did hire his own lawyer. On the
morning of Friday, September 30, he arrived in Room S-i 16 of the U.S.
Capitol. The only people in the room besides Awan and his attorney
were congressional staff members and a court reporter. Awan spent the
next two and a half hours answering questions from Jack Blum about
BCCI and Noriega. He revealed that Noriega had deposited millions of
dollars in BCCI — mostly in cash — and that the bank had been
intimately involved in managing the dictator’s personal finances.

Although Awan seemed to be forthcoming, his testimony was rid¬
dled with lies. He said, for example, that Noriega’s BCCI accounts had
been closed in early 1988, around the time of the indictments. He was
asked about drug money several times, and he said he never knowingly
accepted deposits of drug money or laundered drug money. This was,
of course, also a lie. In the C-Chase operation alone, $32.7 million in
drug money had been laundered — $14.3 million of it through BCCI.

C-Chase was turning out to be a huge success, exceeding everyone’s
expectations. The original goal was to catch drug traffickers, but the
Customs agents had done that and more: they had also snared a major
international bank.

And what a bank it was! Mazur had picked out BCCI by chance, yet
it turned out to be Noriega’s bank and it seemed to have a countless
number of sleazy officers on its staff — men like Awan, who had no
compunctions about handling the dirtiest money. Its connections to
the United States were also intriguing — the links to Clark Clifford,
First American, and National Bank of Georgia. Mazur was convinced
that he and his colleagues would continue to hit pay dirt as the investi¬
gation progressed, that they might even be able to implicate officials at
the very top of BCCI. In September, Nazir Chinoy, a senior BCCI
official in Paris, told Mazur he might be able to arrange for him to
meet with higher-ranking executives — perhaps even the head of the
bank, Swaleh Naqvi.

But Mazur’s superiors decided to halt the investigation in October.
Justice Department officials have portrayed the decision as a purely
technical matter. They felt the Customs agents had gone about as far as
they could, and they feared that prolonging the operation would in¬
crease the risk of exposure. There may have been other factors, how-

Trouble in Tampa ( 2.47

ever, including politics. Everyone knew that a presidential election was
scheduled for November 8, and a high-profile drug arrest could help
the Republican nominee, Vice President Bush. It would certainly boost
the stock of the Customs commissioner, William von Raab, who
wanted to be appointed to the new post of drug czar.

At the U.S. Attorney’s office in Tampa, the prosecutor in charge of
the case was Mark V. Jackowski, who had been working with the
C-Chase agents for months. He happened to be one of the few federal
prosecutors in the country who had ever heard of BCCI: he had
prosecuted two of Awan’s old clients, Steven Michael Kalish and his
partner, Leigh Bruce Ritch. Jackowski had also assisted other members
of the office in preparing the Tampa indictment of Noriega, which was
based largely on testimony by Kalish. Jackowski’s desire to nail the
Panamanian was obvious to anyone visiting his office. Displayed
prominently on the wall was a picture of Noriega in the form of a
dartboard.

On October 4, a federal grand jury in Tampa indicted ten current
and former BCCI employees and four corporate entities related to
BCCI."' The bankers were:

• Syed Ziauddin Ali Akbar, the head of Capcom and the former
head of BCCI’s treasury department;

• Iqbal Ashraf, the manager of the Los Angeles branch and the
former manager of the Tampa branch.f

• Amjad Awan, a marketing officer for the Latin American region,
in Miami, until mid-September 1988;

• Asif Baakza, the director of the corporate unit for BCCI in Lon¬
don;

• Akbar Bilgrami, the head of marketing for the Latin American
region, in Miami, until mid-September;

• Nazir Chinoy, the regional general manager in Paris for Europe
and French-speaking Africa;

• Sibte Hassan, an assistant to Chinoy;

• Ian Howard, the country manager for France;

• Syed Aftab Hussain, an officer in BCCI’s Panama City branch;
and

• Saad Shafi, the country manager for the Bahamas.

’'‘Several suspects with no ties to BCCI were also charged as a result of the C-Chase
probe, including drug traffickers and cash couriers.
tAll charges against Ashraf were later dismissed.

FALSE PROFITS

248 )

The four corporate entities were Capcom Financial Services Ltd. and
the three main units of the BCCI group: BCCI Holdings (Luxembourg)
S.A., the main holding company of the group; BCCI S.A. (also in
Luxembourg), the flagship bank of the group; and BCCI (Overseas)
Ltd., the group’s holding company in the Cayman Islands.

All of the BCCI defendants were accused of conspiracy to possess
with intent to aid and abet others with the distribution of cocaine;
conspiracy to defraud the Internal Revenue Service; and conspiracy to
launder the proceeds of cocaine sales. All of the BCCI defendants
except Ashraf and BCCI S.A. were also accused of knowingly launder¬
ing about $14 million of cocaine revenues.

The indictment was sealed so that the defendants would not disap¬
pear; it would be made public only after the arrests. But Customs faced
a daunting problem. Many of the defendants — including most of the
bankers — lived outside the United States. Before Customs agents
could spring the trap, they would have to lure their prey to American
soil. It was time for “Bob Musella” to get married.

During the two years that he posed as a professional money launderer,
Robert Mazur was an extraordinarily good actor. He had to be — his
life depended on it. The men he was investigating not only trusted him,
some of them also became good friends. Mazur visited their homes,
spent hours drinking and gossiping, and partied at discos. All of this
was necessary to maintain his cover, but there were limits on how far
he could go. Some of the people he was investigating tried to fix him up
with prostitutes. Partly to avoid such entanglements, Mazur was
teamed with a female undercover agent named Kathy Ertz (known to
the traffickers as Kathy Erickson), who posed as his fiancee.

The phony romance between Bob and Kathy became the foundation
of a scheme by Customs to lure the suspects to U.S. territory. Mazur’s
new friends were sent formal invitations to attend the wedding of
“Robert L. Musella and Kathleen Corinne Erickson.” The blessed
event would be held on Sunday, October 9, at the Innisbrook Resort
and Country Club in Tarpon Springs, Florida, just outside Tampa. A
great deal of preparation went into the event — just as for a real
wedding. Customs agents rented a room at the country club and had a
sign set up to indicate where the “Musella-Erickson Wedding” would
be held.

Amjad Awan and Akbar Bilgrami flew in from Miami; others came
from as far away as Panama, France, and Colombia. One of the
guests — the launderer Gonzalo Mora, Jr. — sent $20,000 worth of

Trouble in Tampa ( 249

Colombian red roses. Some of the bankers Mazur had dealt with in
Europe could not come to Tampa, so alternate arrangements were
made: British and French Customs agents were asked to make those
arrests.

By pure coincidence, BCCI was holding an important event that
very weekend: a conference in London involving about a hundred
BCCI officers from around the world. The theme could not have been
more appropriate: “The Moral Dimension of BCCI.” A report on the
conference in the bank’s employee magazine said: “The spirit of BCC
is permeated by a moral dimension and this eases the burden of man¬
agement. The challenge of BCC will be met with happiness and will be
achieved in happiness. The times that we live through demand that
BCC leadership ignites in every member of our family the highest
quality of vision and the highest moral quality. Courage and purity will
prevail.”

Saturday was to be “Bob Musella’s” last night as a bachelor, so a
stag party was organized at a restaurant on the top of a building in
downtown Tampa. That evening, Awan and other out-of-town guests
were taken there by limousine. It was supposed to be a raunchy affair,
complete with strippers, and some of the guests were eagerly looking
forward to the action. On the way to the party, Mora turned to an
agent and said in Spanish, “I really need a good fuck tonight!” The
agent replied, “Gonzalo, don’t worry, I can assure you you’re really
going to get fucked tonight!”

As each guest stepped out of a parking garage elevator, a pair of
handcuffs was slapped on his wrists and he was greeted warmly:
“Welcome to Tampa. You’re under arrest.” The men were so startled
that it took a while for them to realize what was happening. One
banker even thought that the handcuffs were part of the fun — the
prelude to some kind of kinky sexual game! The cold reality soon
became apparent as the visitors were hustled back into their limou¬
sines, driven to the Tampa Federal Building, and booked.'"Five of the
men arrested that night in Tampa were BCCI bankers: Awan, Bilgrami,
Hassan, Floward, and Hussain.

As Customs commissioner, William von Raab attracted criticism from
many quarters, but no one could deny that he was a master of public
relations. The Operation C-Chase indictment was announced with

^During the next few days, two BCCI bankers were arrested in London, Asif Baakza
and Nazir Chinoy, as was Capcom’s S. Z. A. Akbar.

FALSE PROFITS

2.5O )

considerable fanfare. On the morning of Tuesday, October 11, about
fifty journalists and photographers gathered at the Sheraton Grand
Hotel in Tampa. The turnout was large because the press officers from
Customs had alerted the media the day before that the press confer¬
ence concerned one of the most important drug money cases in history.
An information kit was distributed, including a press release, a copy of
the indictment, and background on the investigation. There were even
photocopies of the Musella-Erickson wedding invitation.

Von Raab and U.S. Attorney Robert W. Genzman were flanked by
representatives of the other federal agencies involved in the case: the
IRS, FBI, and DEA. There were also senior officials of European law
enforcement agencies: Brian Unwin, the chairman of British Customs,
and Jean Weber, the director general of French Customs. Von Raab
declared that Operation C-Chase was “the most important money¬
laundering case in U.S. Customs history,” and he branded BCCI a
corporate criminal — “an institution that was prostituting itself to
money laundering.”

In spite of the publicity blitz, von Raab and the prosecutors withheld
one of the most important bits of information from the press. They
never mentioned that Noriega’s personal banker was now in custody.
At Jack Blum’s urging, Kerry held a press conference the next day in
which he disclosed Awan’s ties to the Panamanian and released a copy
of Awan’s deposition. Kerry also told reporters that his committee had
information suggesting that BCCI was implicated in a vast array of
misdeeds. He said that the bank had been involved in arms transac¬
tions in the Middle East and huge deals with Colombian drug dealers.

The failure of the Justice Department and the Customs Service to
disclose Awan’s ties to Noriega was obviously deliberate. Von Raab
has asserted that he did not want to distract attention from the work of
the Customs agents, but it is much more likely that he and the prosecu¬
tors wanted to avoid embarrassing George Bush less than a month
before the presidential election. Bush’s candidacy could only be
harmed by a reminder that the Reagan administration’s attempts to
dislodge Noriega had failed and that the dictator was continuing to
thumb his nose at the United States.

This curious omission was not the government’s first questionable
action in the C-Chase case. Earlier, as we have seen, the investigation
was brought to an end over the objections of Robert Mazur. There
would be many more dubious decisions in the months to follow, which
would ultimately lead to charges of a cover-up.

Containment

Operation C-Chase thrust BCCI into the spotlight for the first
time since the takeover battle for First American. The bank would be
scrutinized as never before.

Federal agents obtained search warrants and seized thousands of
documents from BCCI branches in the United States. “We have liter¬
ally a truckload of documents,” said Steve Cook, a Customs agent
who had coordinated the C-Chase probe. “We have so many docu¬
ments that we had to subcontract out the copying to a private firm.”
British Customs agents seized records from the bank’s headquarters in
London. At the same time, federal and state bank regulators con¬
ducted detailed inspections of BCCI’s American branches. They also
began to query First American about its ties to BCCI. Jack Blum
continued to gather information on BCCI — with the help of several
“deep throats,” including current and former employees of the bank.

BCCI was also being examined by the news media. The day the
indictment was announced, Operation C-Chase was one of the lead
items on the network news. As newscasters talked about millions of
dollars in drug money, viewers watched BCCI officers with manacles
on their wrists being hustled into police vans. During the next few
days, the case was front-page news around the world. The London
Financial Times's story was headlined “Luxembourg-based bank in¬
dicted on drug money charge.” Paris’s Le Monde carried a front-page
story, “ Largent de la drogue f blanchi 9 par une banque internationale”
(Drug money “laundered” by an international bank). Press interest
intensified when Senator Kerry revealed that BCCI was the favorite
bank of Manuel Noriega.

( 2.5 1 )

FALSE PROFITS

2 5 2 )

A much bigger potential threat to BCCI than the news media was
federal law enforcement agencies. “I would predict,” said the Customs
chief William von Raab, “that this case is going to go on for a year or
more, just a constant turning over of more rocks, following down
more leads.” It seemed inevitable that federal agents and prosecutors
would uncover the full extent of BCCI’s criminality, including its co¬
vert ties to First American and the multibillion-dollar Ponzi scheme at
the heart of the bank. BCCI reacted by launching a massive counter¬
offensive. The bank and its allies called in the political chits they
had accumulated over the years and spent millions of dollars on law¬
yers, lobbyists, and public relations experts. The goal was contain¬
ment.

When the indictment was announced on October 11, 1988, the switch¬
board at BCCFs London headquarters was flooded with calls from
journalists wanting the bank’s reaction. The person in charge of deal¬
ing with reporters was John Hillbery, a polished Englishman who had
long acted as BCCI’s chief spokesman. He had often been forced to
deal with provocative questions, and he developed a standard patter.
There was nothing strange or sinister about BCCI, Hillbery would
assure journalists in soothing tones. The bank had grown rapidly
because of its Middle Eastern connections. It made its money by
concentrating on certain niches, such as trade financing. If other banks
looked down their noses at BCCI, that was because of their jealousy at
its success — coupled with ethnic prejudice. Hillbery’s response to the
crisis in Tampa could be of vital importance to BCCI. Banks depend
on confidence, and any erosion of confidence can provoke a run on
deposits.

Hillbery quickly issued a statement. “The bank,” he declared, “is
wholly unaware of any violation that allegedly has been committed. It
would seem, however, that the concerted action by authorities in three
countries is part of an international investigation which involves many
individuals and institutions. BCC finds itself involved in a malicious
campaign against itself which will have to be unravelled in the courts.
The bank wishes to state categorically that at no time whatsoever has
it been involved in drug-traffic-related money laundering.”

The comment about a “malicious campaign” was absurd on its face.
If there was such a campaign, how could Hillbery have learned about
it so quickly? Of course, there was no such campaign; bank regulators
and law enforcement authorities had been largely oblivious of BCCI’s

Containment ( 253

criminality for years. It was by happenstance that U.S. Customs had
started looking into the bank.

Two days later, BCCI issued a statement aimed at reassuring deposi¬
tors. It referred to the “unfailing support” of shareholders and to the
bank’s financial health — “$1.6 billion in capital funds” and 1987
profits (before taxes and provisions) of $185 million. At the time, of
course, no one outside BCCI knew that its annual reports were works
of fiction. The statement also sought to distance BCCI from the indi¬
vidual bankers who had been indicted. None of the individuals was a
senior executive, BCCI said. “The only relatively senior person among
the defendants is based in Paris supervising French-speaking Af¬
rica” — Nazir Chinoy. What is more, it was bank policy “that all
governing rules, regulations, and laws must be strictly observed by the
staff in the conduct of bank business.” The clear implication was that
if the individual defendants were involved in money laundering, they
were rogue employees acting purely on their own.

Whatever skills Hillbery possessed, they were unequal to the job of
dealing with a public relations disaster of this magnitude. BCCI was
soon getting advice from hordes of professionals, notably Clark Clif¬
ford and Robert Altman.

Clifford and Altman were not the attorneys of record in the Tampa
case, but they assembled the defense team, coordinated its work, and
briefed BCCI officials on the case. The same day Hillbery put out his
reassuring statement, Altman and two criminal defense lawyers met
with BCCI executives in London. Altman returned to London four
more times before the end of the year, with Clifford accompanying him
on the last visit. During the first half of 1989, Altman made six more
trips to Europe to meet with BCCI officials, three of them with Clif¬
ford.

The indictment occurred at the same time that BCCI was riven by
the power struggle touched off by Abedi’s illness, with members of
Zafar Iqbal’s Gulf faction vying for power with the technocrats, who
were led by Swaleh Naqvi. One result was that Altman’s influence
increased enormously. Some executives said — only partly in jest —
that Altman was the de facto head of the bank. If true, it would mean
that Altman, a Jewish lawyer from Washington, D.C., was calling the
shots at two of the biggest Arab-owned banks in the world, BCCI and
First American.

It was not simply a lawyer-client relationship. In the BCCI drama,

FALSE PROFITS

2 54 )

Clifford and Altman played so many roles that they were like vaude¬
ville actors, frantically rushing on and off the stage for quick costume
changes. They were — simultaneously — lawyers for BCCI, lawyers
for First American, top executives of First American, and paymasters
for the Tampa defense lawyers. And these were just the roles that were
known at the time. Later, as we shall see, it emerged that they had
borrowed from BCCI to buy stock in First American.

An obvious pitfall in their playing so many roles is the possibility of
conflicts of interest. One clear example concerns BCCI’s relationship
with First American. Could First American really be regarded as
wholly independent of BCCI’s influence when the men who ran it were
receiving substantial legal fees from BCCI? A test of First American’s
autonomy occurred in 1988, when BCCI was investigated by the Kerry
Committee and the Customs Service. Investigators found that Amjad
Awan had channeled millions of dollars of Noriega’s money through a
BCCI account at First American. Even worse, defendants in Operation
C-Chase had laundered nearly $7 million in drug money through First
American. Clifford and Altman — wearing their First American
hats — should have been outraged. If they had been running Citibank
or Chase Manhattan, it’s a good bet they would have told BCCI to take
its business elsewhere. But when they put on their BCCI lawyer hats,
the situation became awkward. How could they tell BCCI to get lost
without undermining an important client? Whose interests would they
put first. First American’s or BCCI’s?

There were other important interests at stake as well — their own.
Before the indictment in Tampa, there had already been allegations
that Altman was involved in wrongdoing. Awan, as noted earlier, had
suggested in a conversation with Mazur that Altman was trying to
interfere with the Kerry Committee’s probe by advising BCCI to trans¬
fer him out of the country. (The lawyer denied the allegation.) In the
same conversation, Awan said he suspected that BCCI secretly owned
First American. If BCCI had acquired control of the banking company,
did it do so with the knowledge — perhaps even the collusion — of
Clifford and Altman?

The legal defense team put together by Clifford and Altman was
headed by three Washington attorneys: Raymond Banoun of Arent,
Fox, Kintner, Plotkin &c Kahn; E. Lawrence Barcella, Jr., of Laxalt,
Washington, Perito &c Dubuc;* and Lawrence Wechsler of Janis,

*Laxalt, Washington went out of business in 1991.

Containment

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Schuelke &c Wechsler. (They were assisted by lawyers at other firms,
notably Miami’s Holland Sc Knight.) Wechsler was an old friend of
Altman’s; he was one of a number of pals who often went to Altman’s
mansion in Potomac, Maryland, to watch football games on Sundays.

Banoun, Barcella, and Wechsler had known one another since the
1970s, when they worked as prosecutors in the office of the U.S.
Attorney for Washington, D.C. After going into private practice, all
three men developed reputations as white-collar crime experts.
Banoun, for example, served as chairman of the White Collar Crime
Committee of the American Bar Association. Wechsler’s firm repre¬
sented the arms dealer Albert Hakim, a central figure in the Iran-con¬
tra scandal.

Barcella was perhaps the best known of the three, having handled
two cases that attracted tremendous press coverage. As a federal pros¬
ecutor, he investigated the 1976 murder of Orlando Letelier, a former
Chilean diplomat living in Washington. After Letelier became a prom¬
inent critic of the Pinochet dictatorship, he was killed in a car bomb¬
ing. Barcella also prosecuted Edwin Wilson, a former CIA agent who
had sold arms to Libya’s Moammar Qaddafi. Barcella secured a con¬
viction. Because of the Letelier and Wilson cases, Barcella developed
excellent contacts in the press and a great deal of credibility. This
would come in quite handy when he became one of the most forceful
apologists for BCCI.

BCCI received advice on lobbying and public relations from several
sources, including Kissinger Associates, the advisory firm owned by
the former secretary of state, according to internal BCCI records.
Henry Kissinger’s ties to associates of Abedi’s dated from at least the
early 1970s, as noted in Chapter 6, and there were other connections
over the years.

In 1985, Kissinger provided advice to Roy Carlson, the chairman of
National Bank of Georgia, according to NBG records. (Carlson, of
course, had helped to arrange Bank of America’s investment in BCCI
when he worked for the California bank.) Kissinger has said that this
was a one-time briefing that included other bankers, and he denied
that he was paid by NBG. Not long after that, Kissinger Associates
hired a BCCI front man, Sergio Correa da Costa, who served as
Brazil’s ambassador to the United States until 1986. While he was a
consultant to Kissinger’s firm, he was also a nominee shareholder in
BCCI’s Brazilian subsidiary as well as its chairman. (A spokesman for
Kissinger says that if Correa da Costa also worked with BCCI, that
was his affair.)

FALSE PROFITS

256 )

Shortly after he started working for Kissinger’s firm, Correa da
Costa began trying to forge a relationship between BCCI and the
consulting firm. He tried to arrange for Kissinger to meet Ghaith
Pharaon, but Kissinger declined. One employee of the firm was more
responsive: Alan Stoga, an international economist. In May 1987,
Correa da Costa introduced Stoga to Abol Fazl Helmy, a BCCI officer
in New York.

On October 6 of the following year (five days before the Tampa
indictment became public), Helmy had lunch with Stoga. The follow¬
ing day, Stoga wrote to him, saying he had enjoyed the lunch “and,
even more, your suggestion that BCCI might be interested in develop¬
ing a relationship with Kissinger Associates.” On October 12, Stoga
called Helmy with advice from Kissinger on how to deal with the case,
according to a memo sent by Helmy to Swaleh Naqvi that day. “Dr.
Kissinger,” wrote Helmy, “recommends that a public relations offen¬
sive be made by us and in that context has suggested using Burson-
Marstellar, a highly reputable public relations firm.”"' Helmy re¬
mained in touch with Kissinger Associates for the next few months,
keeping Naqvi apprised of his contacts. In a December 19 memo to the
BCCI chief, Helmy noted that two of Kissinger’s partners would be
joining the incoming Bush administration, a reference to the national
security adviser, Brent Scowcroft, and Deputy Secretary of State Law¬
rence Eagleburger.

When asked years later about the firm’s dealings with BCCI, Stoga
acknowledged that there were meetings until January 1989 but said
that the firm was never hired by the bank. He denied advising BCCI
about which PR firm to hire. Stoga did, however, recommend a lawyer.
In February 1989, he suggested that BCCI retain William D. Rogers
of Arnold & Porter. Rogers, a former undersecretary of state,! used to
work in the Washington office of Kissinger Associates. BCCI took the
advice. In 1989 and early 1990, Rogers and three of his partners
assisted BCCI. To handle PR, the bank retained Hill and Knowlton.

John Hillbery, BCCI’s chief spokesman, signed a contract with the
London office of Hill and Knowlton three days after the indictment
was made public. The bank agreed to pay £25,000 (about $44,000)
per month plus expenses.

*The correct spelling is Burson-Marsteller.

fHe should not be confused with William P. Rogers, a former secretary of state.

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Hill and Knowlton had a close relationship with Clifford’s law firm
and First American. “We’ve worked with Clifford &c Warnke on many
things over the years,” said an official of the PR firm. Robert Keith
Gray, the head of its Washington office, was on the board of First
American’s Washington bank, as noted in Chapter 5.

Gray boasted high-level connections in the Republican party. He
worked on Reagan’s campaign in 1980 and then served as co-chair¬
man of the inaugural committee. Gray did not neglect Reagan’s succes¬
sor. He was co-chairman of Bush’s inaugural committee after the 1988
election. In late 1990, Hill and Knowlton acquired a lobbying outfit
headed by Craig L. Fuller, who had been chief of staff for Bush when
he was vice president. (Fuller left Hill and Knowlton in early 1992.)
Gray was also connected to the intelligence world. He had been
brought into the Reagan campaign by the campaign manager, William
Casey, who soon became CIA director. Back in the 1970s, Gray served
on the board of a company controlled by Edwin Wilson, the renegade
CIA agent who was prosecuted by Larry Barcella.*

Hill and Knowlton also employs well-connected Democrats; ideo¬
logical purity is much less important than access and influence. A
top official in the Washington office is Frank Mankiewicz, a veteran
party activist. In the 1968 presidential race, he was a senior aide to
Robert F. Kennedy. Four years later, he served as press spokesman for
the party’s nominee, Senator George McGovern. During the 1988
campaign, Mankiewicz attended the breakfast for Jesse Jackson or¬
ganized by Bert Lance. Clark Clifford, as noted in Chapter 5, was the
star attraction. In defending the firm’s willingness to represent BCCI,
Mankiewicz told the National Journal in 1991 that the bank had
“a pretty good reputation” in 1988. When he was reminded that at
least three Hill and Knowlton employees refused to work on the
account because of BCCI’s sleazy reputation, Mankiewicz shrugged
off the contradiction: “A lot of people don’t work on a lot of our
accounts.”

One way in which Hill and Knowlton tried to help BCCI was by
telling reporters that several other major banks had run afoul of U.S.
laws — downplaying the fact that these cases nearly always involved
the failure to file currency transaction reports, a far less serious of-

*Gray has asserted that he was only a casual acquaintance of Wilson’s and that the arms
dealer used his name without permission. In fact, Gray and Wilson had extensive business
and personal ties.

FALSE PROFITS

258 )

fense. Hill and Knowlton also promoted the idea that BCCI was a solid
and stable bank. A “backgrounder” dated October 26, 1988, said the
bank “stresses conservatism, prudence and liquidity in its deposit
taking and lending activities.” That same day, Hill and Knowlton
officials met with Swaleh Naqvi and agreed on a “plan of action.” The
plan makes it clear that image-building could be a costly exercise for
BCCI. The “account team” included twenty-two Hill and Knowlton
employees in ten countries. One item in the “plan of action” was
to spend about $75,000 to produce “a video for staff of an interview
with Mr. Naqvi” to be distributed around the bank’s branches. “It
could be used not only for staff but also in segments on ‘real’ TV
stations.”

The PR men also advised BCCI executives on which journalists they
should see and which ones to avoid. When, for example, Jeff Gerth, a
veteran investigative reporter for the New York Times , started looking
into BCCI, Hill and Knowlton advised bank officials not to talk to
him.

BCCI was not an easy client. For one thing, Naqvi was so mistrust¬
ful of Western journalists that he would not even talk to them on a
background basis. Another problem was the bank’s penchant for tell¬
ing lies. (As noted earlier, BCCI officials told several whoppers to
journalists when the First American stock purchases were exposed in
1978.) Cultural barriers were another obstacle. Some BCCI officials
wanted to give reporters copies of speeches and other material written
in the bank’s peculiar argot — the pseudo-philosophical “BCCI-
speak” that Abedi and some of his associates used. A Hill and Knowl¬
ton official says he “told Naqvi the material was worthless.” But the
biggest constraint on the PR men was that the bank was under indict¬
ment, which meant that the lawyers would be in charge. Anything
more than routine information would have to be vetted by the legal
team. On January 11, 1989, Naqvi sent a memo to Clement R.
(“Kim”) Gagne III, a lawyer in Larry Wechsler’s firm, saying that all
inquiries “that relate in any fashion to the legal investigations in and
proceedings concerning the U.S. criminal case or related matters”
should be referred to Gagne. From that point on, Gagne and the “two
Larrys” — Wechsler and Barcella — became de facto PR men for
BCCI.

Much of the information provided to reporters by Wechsler and
Barcella later turned out to be false or misleading. Most of the time,
this did not reflect on them; they were simply acting as conduits of

Containment ( 259

information from the bank. Sometimes, though, they made dubious
statements on their own authority.

Barcella, for example, was asked on March 26, 1990, about the
bank’s compliance with U.S. laws on cash transactions. He replied that
“BCCPs policies and procedures were consistent with industry norms
in the countries in which they were operating,” including the United
States. That remark conflicts with findings by American bank regula¬
tors. On September 30, 1988, the Federal Reserve and the New York
State Banking Department conducted a joint examination of BCCI’s
New York agency. One part of their report dealt with the Bank Secrecy
Act — the federal law that requires banks to fill out currency transac¬
tion reports (CTRs) for large cash transactions. It stated, in part, that
“the agency was found to be deficient in all respects concerning com¬
pliance with the requirements of the Financial Recordkeeping and
Reporting Regulations” (emphasis added).

What is even more curious is that Barcella’s remark was con¬
tradicted by the findings of auditors and investigators who were assist¬
ing the defense team. On January 5, 1990, Whitney Adams, a law
partner of Barcella’s, sent a memo to a BCCI official discussing the
results of a study by investigator Charles Morley. A paragraph headed
“Bank Secrecy Act Compliance” states:

Mr. Morley’s memorandum describes in detail the areas of deficiency
with respect to Bank Secrecy Act compliance. In general, the system
is inadequate with respect to reporting currency transactions exceed¬
ing $10,000, identifying suspicious currency transactions, account¬
ing for CTR exemptions, or reflecting regulatory changes in the BSA
regulatory requirements which are expected to occur shortly.

At the bottom of the memo are the names of the eight people who were
to receive copies of it, including E. Lawrence Barcella.

Some months after the March 1990 interview in which Barcella
vociferously defended BCCI, he did some legal work for one of the
bank’s chief accusers, the former Panamanian diplomat Jose Blandon.
As noted in Chapter 10, Blandon had told the Kerry Committee that
BCCI was at the heart of Noriega’s criminal empire.

One potentially explosive issue — BCCI’s relationship to First
American Bankshares — was handled personally by Robert Altman.

The Tampa indictment raised the specter that news organizations
would start to ask embarrassing questions about BCCI’s ties to First

2.6 o )

FALSE PROFITS

American for the first time since it was acquired by BCCI’s clients in
1982. The biggest source of concern to Clifford and Altman must have
been the Washington Post , since most First American customers live in
the Washington area. In addition, the Post is read by thousands of
federal officials, some of whom could make life difficult for BCCI and
its Washington lawyers.

The initial signs were encouraging. The Post's front-page story on
the indictment contained no reference to First American. The paper
corrected this oversight the next day with a brief article in the business
section, noting that the shareholder groups overlapped and that Clif¬
ford and Altman were associated with both banks. But the bulk of the
story was devoted to remarks by Altman playing down the relation¬
ship. He said the overlap was “not as great as you might think,” that
Abedi played no role in setting policy at First American, and that
Abedi sometimes spoke to First American officials to check on the
company’s progress on behalf of its Arab owners.

The city’s other daily newspaper, the Washington Times , ran a much
more forceful story that day. Splashed across the top of page 1, it
highlighted Clifford’s role in dealing with the Kerry Committee’s inves¬
tigation. The article also contained an explosive allegation attributed
to committee sources: First American could be secretly owned by
BCCI. This story attracted little attention, however, perhaps because
few journalists take the paper seriously. It is connected with the Uni¬
fication Church of the Reverend Sun Myung Moon (the “Moonies”)
and often prints half-baked stories. A business writer at the Post
published a column the following week which was apparently aimed
at debunking the Washington Times article. The Post's Rudolph A.
Pyatt, Jr., portrayed First American as a victim of guilt by association.
First American, he wrote, “is being subjected to innuendo and wild
speculation in the wake of the allegations against BCCI.”

One weapon in BCCI’s armory was the threat of libel suits. This is
particularly effective in Britain, where the law heavily favors plaintiffs.
Over the years, countless scoundrels have taken advantage of British
libel law to prevent the press from exposing their wrongdoing. One
notable example is the late Robert Maxwell. The lack of scrutiny by
the press made it easier for him to commit massive frauds, including
the looting of employee pension funds.

Like Maxwell, BCCI used Britain’s libel laws to intimidate and
punish nosy journalists. In the early 1980s, as we have seen, BCCI sued

Containment

( 261

the New Statesman after it published a major expose about the bank.
The cost of litigation helped to drive the publication out of business.

The author of that article, Tariq Ali, tangled once again with BCCI
after the C-Chase indictment. Ali was now the producer of Bandung
File , a television program on Third World affairs on Britain’s Channel
4. (It takes its name from a 1955 conference of nonaligned states held
in Bandung, Indonesia.) Soon after the indictment, Ali began work on
a television expose.

When the bank got wind of the program, its lawyers complained to
the British government that the show could be prejudicial to the BCCI
defendants who were to be tried in England. On January 12, 1989,
government lawyers told Channel 4 to cancel the program and threat¬
ened to seek a court injunction to prevent the broadcast. Channel 4
resisted, and the attorney general backed down. The program was
shown on January 16.

Several months later, Ali was planning another broadcast on BCCI;
this time the bank did not resort to the legal process. In late 1989, Ali
said, he was approached by “a very distinguished Pakistani, a man of
medicine,” who claimed to be acting on BCCI’s behalf. Ali said the
man offered him £2 million (about $3.3 million) to fund a television
drama series written by Ali. There was one important condition: the
program on BCC would be canceled. Ali rejected the bribe and the
program was broadcast as scheduled.

Although Ali could not prove that the man was working for BCCI, a
former bank official says that many journalists were paid off by the
bank. He says, for example, that a journalist in the United States who
covered the Middle East was paid a monthly retainer by a BCCI front
man. After the indictment, this journalist gave BCCI advice on how to
influence other reporters. At the same time, the journalist was covering
the story for his own publication.

In their attempts to manipulate public opinion, some BCCI officials
exploited anti-Semitism by spreading the word that the bank’s troubles
in the United States were the fault of the “Zionist lobby.” They would
point out that some of the bank’s antagonists had “Jewish-sounding”
names, including Jack Blum and Mark Jackowski. While it is true that
Blum is Jewish, Jackowski has a Polish-Catholic background. What¬
ever their ethnicity, there is no evidence that the probes were motivated
by anything other than BCCI’s own conduct.

Blum encountered this allegation repeatedly during a visit to Paki¬
stan in June 1989. “The bank has laid upon everybody that this is a

FALSE PROFITS

262 )

Zionist plot,” he said shortly after his return, “and this has been
published in Pakistani newspapers.” In an effort to disabuse Pakistanis
of that notion, Blum said he “told people there were two thousand
tapes where the various defendants explain to people how to launder
drug money.”

With BCCI’s encouragement, the Zionist plot story was widely dis¬
seminated. When an English-language newspaper in Kuwait printed
an article on this theme, bank officials gave reprints to many of their
customers. “I saw a copy of it in a BCCI office in South America,” says
a former official. “Management had circulated it globally.”

In June 1989, defense lawyers for BCCI were asked whether the
bank actually believed it was the victim of the “Zionist lobby” and
whether it had ever spread that story. In a written reply, Wechsler and
Barcella said, “The management of BCCI has not and does not con¬
tend that any ‘Zionist lobby’ is behind investigations of the Bank by
U.S. authorities. The Bank’s position on the indictment is reflected in
its press release of 13 October 1988, a copy of which is attached for
your reference.” This reply, of course, ignored the question about
whether the bank had spread the story.

While BCCI’s propagandists tried to limit the damage to the bank’s
image, the wheels of justice were turning in Tampa. The bankers who
had been arrested in October asked to be released from jail on bond,
but the prosecutor, Mark Jackowski, argued that there was a “flight
risk.” The judge released two defendants (Hassan and Ashraf) and
agreed to a compromise for the other four (Awan, Bilgrami, Howard,
and Hussain) — a kind of “house arrest.” They would move into
apartments in the Tampa area and wear electronic monitoring devices
on their ankles. The apartments would be guarded by off-duty police¬
men. (Three defendants connected to BCCI had been taken into cus¬
tody by British Customs: Akbar, Baakza, and Chinoy. The Bahamas
branch manager, Saad Shaft, was never arrested.)

During the bond hearings, Jackowski dropped several bombshells.
He claimed, for example, to have evidence that the bankers were
acting not on their own behalf but on behalf of the bank. “As far as we
are able to tell, Your Honor, none of these defendants received any
personal remuneration in connection with any of their activities,” he
said. At one point during the investigation, Jackowski said, one of the
bankers rejected a payoff from an undercover agent, saying, “No, no,
no. I don’t need a bribe. I get paid by the corporation.” Ian Howard,
said the prosecutor, “indicated that notwithstanding his personal dis-

Containment

( 2.63

taste with respect to drugs, he continued to transact business with the
undercover agents . . . because he had decided to subjugate his own
personal interest to .. . that of his employer.”

Although the bankers did not profit, Jackowski said, BCCI benefited
in two ways. It received cheap deposits and it used deposits of drug
money to artificially inflate (“window-dress,” in banking jargon) its
balance sheet. Some of the defendants, according to the prosecutor,
indicated that high-level officials at BCCI knew what was going on. In
one taped conversation, Awan, Hassan, and Bilgrami told an under¬
cover agent that there was an “inner circle” of senior officials who
were aware of drug-money activities and, said Jackowski, “had given
their approval to those activities.” One of the defendants went so far
as to say that he “had the support of the board.”

Shortly after the bond hearings, BCCI’s defense lawyers provided
some clues about their strategy. One defense motion asked that the
case be dismissed on the ground of “outrageous government con¬
duct” — similar to the defense of entrapment. The motion said that
“the government agents sought out the defendants for the specific
purpose of luring them into criminal activity.”

While prosecutors and defense lawyers fired salvos of paper at one
another, investigators continued to gather information on BCCI.
Shortly after the indictment, British Customs agents arrived at BCCI’s
headquarters in London with a warrant to search for records relevant
to C-Chase. In the course of the search, they stumbled upon a treasure
trove of documents related to Noriega. BCCI’s lawyers fought unsuc¬
cessfully to prevent British Customs from turning the records over to
their American counterparts. The documents were sent to the United
States in early 1989.

Brian Ross, an investigative reporter for NBC-TV, revealed the exis¬
tence of the documents in a broadcast on June 15, 1989. He reported
that the records showed that BCCI had transferred more than $20
million of Noriega’s money from London to Luxembourg in early
1988 — right after he was indicted. U.S. Customs tried to find out who
had leaked the documents to NBC, says Jack Blum, adding that he was
a suspect. In July, Customs officials contacted Blum and said they
wanted to talk to him. When he explained that he and his wife were on
their way to the airport to begin a month-long vacation in Europe, the
officials dashed to the airport and held the plane while they questioned
him about the leak. “I never saw those documents,” he says. “I had left
the Senate by then.”

The NBC story was significant for two reasons. First, it suggested

FALSE PROFITS

164 )

that BCCI was helping a criminal defendant put his money out of
reach of U.S. law enforcement authorities. Second, it meant that the
bank had withheld important documents concerning Noriega from the
Senate.

When Senator Kerry learned of the NBC report, he was incensed.
On July 7, he wrote to Clifford demanding “prompt production of the
documents.” (BCCl’s lawyers have argued that the Senate subpoena
did not cover records held outside the United States. The records were
nonetheless turned over to Kerry.)

By this time, Jack Blum had returned to private practice. His con¬
tract had expired on March 31, and the probe was handed over to two
young lawyers on Kerry’s staff, David McKean and Jonathan Winer.
Before leaving the Senate, Blum had shared some of his findings with
prosecutors and federal agents in Florida. He had even persuaded two
former BCCI officials to talk to federal authorities. One informant was
Amer Lodhi, a lawyer who had worked for BCCI and Ghaith Pha-
raon.* Lodhi had detailed information on BCCI’s misconduct — in¬
cluding its very close ties to U.S. financial institutions.

Blum heard about Lodhi in March 1989. “I was in the process of
cleaning out my desk,” he later recalled, when “I received a telephone
call from a former client of mine who said, ‘I was talking to this guy
who was very highly placed at BCCI, and I brought your name up, and
he said your investigation almost brought the house down there and
that there was a full court press to make sure that it did not get
anywhere.' And I said, ‘Would this guy talk to me?”’

Through his former client, Blum got in touch with Lodhi and ar¬
ranged to meet him later that month at the Embassy Suites hotel near
the Miami airport. Blum notified Mark Jackowski in Tampa, and the
prosecutor arranged for Customs and IRS agents to bug the room.
“There were all sorts of funny scenes,” Blum recalled. The agents
“discovered that the Embassy Suites used cinder block between rooms,
and you can't drill through cinder block to run a wire through the wall.
So they had to figure out how to get the wire through the wall.” For the
next few days, Blum spent about ten hours questioning Lodhi about
BCCI. Toward the end, he persuaded Lodhi to go to Tampa with him
to meet with federal prosecutors.

*Blum says he has never disclosed the names of his informants. Lodhi was identified as
an informant in the New York Times on September 15, 1991. The article was apparently
based on a leak from a law enforcement source.

Containment

( 2.65

There was something of a Keystone Kops atmosphere to their recep¬
tion, Blum recalled. “We get to Tampa, get taken to a hotel near the
airport, and the Customs people find that the hotel is overbooked and
we don't have a place to meet. So we now pile back into the car and
three carloads of cops start tearing around Tampa looking for a place
to meet. We pull up in front of the Hojo’s [Howard Johnson’s]. You’ve
got to see the scene. One of them is on a portable telephone to his
secretary [who was trying to find a hotel room]. Lodhi is getting
increasingly irate.” Eventually, Blum pointed out that hotels usually
have conference rooms, and a small meeting room was booked at the
Howard Johnson’s.

Once again the questioning was taped without Lodhi’s knowledge.
For the next several hours, Lodhi was questioned by prosecutors and
federal agents attached to C-Chase. He talked about BCCI’s political
connections and the bank’s involvement with the drug trade. He said
he suspected that BCCI’s financial statements were phony, that the
“capital” might even be nonexistent. He also had detailed informa¬
tion about BCCI’s ties to First American and other financial institu¬
tions.

The previous year, Amjad Awan had told Robert Mazur that he
suspected that BCCI secretly owned First American and National
Bank of Georgia. Lodhi now repeated the allegation, adding that BCCI
may also have controlled Independence Bank. Although he did not
provide proof, Lodhi was certainly worth listening to, since he had
worked closely with Ghaith Pharaon, the man who supposedly owned
NBG and Independence.

Two weeks later, Blum persuaded another former BCCI official to
come to Tampa — the same man who had talked to him about the
bank when he began his probe in early 1988. This source repeated
much of what Lodhi had said.

If Blum’s informants were right, it meant that BCCI, which was
effectively an international criminal organization, had acquired three
American financial institutions, including the largest banking com¬
pany in the nation’s capital. The implications were shocking. Consider
National Bank of Georgia, which had supposedly been acquired by
Pharaon in early 1978. NBG was a major lender to the family business
of Jimmy Carter. If Pharaon was a front man, it meant that BCCI, in
effect, was owed large sums of money by the president of the United
States. Even if Carter did not know of BCCI’s role, this kind of fi¬
nancial relationship would be highly disturbing.

The allegations could also help to explain First American’s 1987

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266 )

purchase of NBG from Pharaon. Several observers felt that First Amer¬
ican had paid too much, but the deal made perfect sense if BCCI
secretly owned both institutions. At the time, BCCI was desperately in
need of money, and the takeover would enable it to drain money from
a relatively healthy subsidiary — First American. A parent-subsidiary
relationship between BCCI and First American might also help to
account for First American’s sometimes dubious loans to American
politicians — such as the $700,000 lent to Gary Hart during the 1984
presidential campaign. Who was the real lender, First American or
BCCI?

What about CenTrust, the Miami savings and loan in which Phar¬
aon was also a big shareholder? Was BCCI also the owner of this
stock? If so, this would raise questions about campaign contributions
by David Paul, the savings bank’s chairman. Paul had been one of the
biggest single donors and fund-raisers for the Democratic party. When
he showered that money on politicians, was he acting on his own
behalf or was he also buying influence for BCCI?

There were other serious questions. Were the Arab shareholders of
First American — who included some of the most prominent people in
the Middle East — participants in a fraudulent scheme to take over the
U.S. banking company? Were Clifford and Altman accomplices? What
about the police and the bank regulators? If BCCI had really assem¬
bled this “underground empire,” how was it possible that the authori¬
ties knew nothing?

The prosecutors and federal agents in Tampa appeared to take the
allegations of Blum’s informants quite seriously. On May 2, the U.S.
attorney in Tampa subpoenaed records relating to BCCI and First
American. On June 12, a subpoena was served on the Federal Reserve
Banks of Richmond, Atlanta, and San Francisco for documents relat¬
ing to BCCI, First American, and NBG. A federal grand jury was
empaneled in Tampa to investigate BCCI’s ties with First American.

There were also signs that the U.S. Attorney’s office was planning an
aggressive prosecution of BCCI in the drug money case. In May, a
federal grand jury in Tampa returned a superseding indictment that
contained new charges as well as sweeping allegations about the
bank’s practice of collecting dirty money. The indictment included
three new defendants: BCCI’s Colombian bank and two officers of
that bank, Haroon Qazi and Surjeet Singh. In addition, BCCI officers
were accused of laundering drug money as far back as 1983 — three

Containment ( 267

years before Operation C-Chase was launched. (This charge was based
mainly on information from Steven Kalish.)

More important than these changes, however, was a passage in the
indictment alleging for the first time that the laundering of drug money
was corporate policy. BCCI and its Colombian subsidiary, the indict¬
ment said, implemented “a corporate strategy for increasing BCCI’s
deposits by encouraging placements of cash from whatever sources,
specifically including 'flight capital,’ ‘black market capital,’ and the
proceeds of drug sales, in conscious disregard of the currency regula¬
tions, tax laws, and antidrug laws of the United States and of other
nations.”

BCCI’s legal defense team would find it hard to fight these charges.
Under U.S. law, a company can, in certain circumstances, be found
guilty even if the prosecution does not prove that top managers knew
what their underlings were doing. Even if BCCI were found innocent,
it would be a Pyrrhic victory, since the verdict would come after
months of damaging testimony about the bank. The negative publicity
could provoke panic among depositors, prompting them to pull their
money out of the bank. The best outcome from BCCI’s point of view
would be a plea bargain. As part of their efforts to obtain a settlement,
BCCI’s lawyers tried to demonstrate that the bank was reforming
itself.

Accountants from Price Waterhouse (assisted by lawyers and private
investigators) conducted a massive “special audit” of BCCI’s U.S.
operations, aimed at testing the bank’s compliance with American
laws related to money laundering. In the course of the audit, they
uncovered a number of suspicious transactions by BCCI customers
and turned the information over to the government.

Although it is questionable whether BCCI really cleaned up its act,
there is no doubt that the lawyers and accountants “cleaned up.” The
professional fees for C-Chase and related matters were enormous.
BCCI paid $18.7 million in fees, plus another $2.8 million in expenses,
with much of the money going to lawyers for the individual defen¬
dants. Separately, Clifford & Warnke received substantial fees from
BCCI, which was already a lucrative client. Between 1978 and 1990,
BCCI paid about $6 million (plus expenses) to Clifford’s firm. In
addition, First American and related companies paid about $11 mil¬
lion to the firm over the years. Of course, First American, according to
Clifford and Altman, had nothing to do with BCCI.

Publicly, BCCI consistently maintained that it was innocent of all

268 )

FALSE PROFITS

charges. Privately, however, lawyers for the bank tried for months to
work out a settlement. The first attempt was made just days after the
indictment, according to a prosecutor. A lawyer from Holland &
Knight said the bank was willing to plead guilty to one count, and the
offer was quickly rejected. In late 1988 or early 1989, says this source,
a similar offer was made by Wechsler and Barcella. In the latter part of
1989, the negotiations became more serious, and Altman briefed BCCI
on the progress of the talks. He discussed the case with the board of
directors on August 18 and, according to the minutes of the meeting,
“touched on settlement strategy.” Altman also dealt with this issue at a
board meeting on November 27. On December 13, three BCCI law¬
yers — Barcella, Wechsler, and Peter E. George of Holland &:
Knight — met with federal prosecutors to discuss a possible settle¬
ment.

Barcella even tried to enlist the support of Jack Blum. At a breakfast
meeting in early November, Blum recalled a few weeks later, Barcella
said “they were ready to plead guilty and that the prosecution
wouldn’t get anything more out of a trial.” He wanted Blum to “pass
the word around” to the prosecutors. Barcella tried to convince Blum
that BCCI was reforming itself in a serious way, saying, “I’ve been
given carte blanche to clean up the bank.” Blum responded that BCCI
was much dirtier than Barcella realized, that the whole thing could be
criminal. Blum said he “tried to get him to see that — with any luck —
the charges [in Tampa] are just the beginning.”

Barcella also contacted a lawyer who had represented Colombia’s
Banco Occidente in a similar case. The Colombian bank had also been
indicted on drug money charges, but the Justice Department agreed to
make a deal. When Barcella asked why Banco Occidente was treated
more favorably, the lawyer replied, “The problem is that your client is
BCCI.”

When Mark Jackowski was asked in early November if a plea
bargain was in the works, he stated firmly, “I’m preparing for trial.”
The Justice Department’s apparently resolute attitude was reflected in
a speech delivered in October by Attorney General Richard Thorn¬
burgh at a conference on money laundering held in Miami. Thorn¬
burgh declared that the battle against money laundering was a crucial
part of the war on drugs.

The BCCI trial was scheduled to begin on Tuesday, January 16, 1990,
at U.S. District Court in Tampa. The presiding judge was William

Containment

( 2.69

Terrell Hodges. Fifteen months had passed since the bankers had been
arrested, and there was great anticipation. The trial was expected to be
an exciting courtroom drama, pitting the prosecutors, Mark Jack-
owski and Michael Rubenstein, against an array of high-priced legal
talent assembled by BCCI.

But there was no battle of the titans that day. The bank had copped
a plea. If Judge Hodges accepted the agreement, BCCI would be spared
the indignity of a messy trial. Under the terms of the deal, the govern¬
ment would drop all charges against BCCI’s Luxembourg holding
company and its Colombian bank. Bank of Credit and Commerce
S.A., the flagship bank of the group, and Bank of Credit and Com¬
merce (Overseas) Ltd., the Caymans holding company, would plead
guilty to money-laundering conspiracy charges and thirty specific acts
of violating federal laws against money laundering. (Separately,
charges were dismissed against the Los Angeles branch manager, Iqbal
Ashraf. The government never extradited the two employees added to
the case in the superseding indictment, Haroon Qazi and Surjeet Singh
of BCCI’s Colombian bank.) BCCI would be on probation for five
years and would be subject to increased regulation by the Federal
Reserve. It would also be required to “forfeit” about $15 million.

The most extraordinary part of the plea bargain was that the U.S.
attorney in Tampa would agree “not to charge” BCCI or any of its
units “with committing any other federal criminal offenses under in¬
vestigation or known to the government at the time of the execution of
this agreement or relating in any manner to the charges that were the
subject of the instant prosecution.” In other words, the federal prose¬
cutors in Tampa would not follow up the vast number of leads they
had — including the allegation that BCCI illegally owned First Ameri¬
can.

The proposed plea bargain was widely denounced. To some critics,
it appeared that the government had things backward. If BCCI was a
criminal organization, shouldn’t prosecutors have done a deal with the
individual bankers in exchange for their testimony against their superi¬
ors? The monetary penalty was considered meager in light of the
bank’s resources. “This agreement,” said the New York Times in an
editorial, “looks feeble alongside Mr. Bush’s macho oratory about
coordinated drug-smashing programs, the Panama invasion and inter¬
diction along the Colombian coast.”

Senator Kerry said he thought BCCI should have been kicked out of
the country. “Any bank that is caught violating the law with respect to

FALSE PROFITS

270 )

money laundering and drug profits ought to be shut down. Absolutely.
Don’t allow them to operate in the United States. Why should we?”
On January 19, he and three other Democratic senators* sent a letter
to Attorney General Thornburgh harshly criticizing the deal. “The
Administration and the Congress have placed the highest priority on
stopping the flow of illegal drugs into the United States,” they wrote.
“Money laundering enterprises of this type are essential to drug
traffickers. We do not see how this agreement will serve to deter similar
illegal conduct in the future. We do not understand why the plea
agreement should preclude further review of allegations concerning
the structure, operations, and practices of BCCI.” Senators Kerry and
Metzenbaum — along with four House Democrats! — wrote to Judge
Hodges on February 1, asking him to reject the plea bargain and
impose a harsher sentence.

The criticisms were to no avail. The judge approved the agreement.

Although the Justice Department had allowed BCCI to get off with
what was widely regarded as a slap on the wrist, there were hopes that
bank regulators would take a tougher line. One man in a position to do
something was Gerald Lewis, the state bank regulator in Florida,
where BCCI had its biggest presence in the United States. On February
13, a senior Justice Department official sent a very peculiar letter to
Lewis. Charles S. Saphos, the chief of the narcotics and dangerous
drugs section, asked Lewis to allow BCCI to continue doing business
in Florida! “We are . . . requesting that BCCI be permitted to operate
in your jurisdiction,” Saphos wrote, “with the understanding that
certain accounts may be maintained by the Bank at the request of the
Department of Justice which otherwise would be closed to avoid legal
and regulatory violations.” When Lewis asked for an explanation,
Saphos wrote back that he had been misunderstood. “The Department
of Justice,” wrote Saphos, “is not requesting that you permit BCCI to
be licensed.” Lewis wasn’t sure what the department wanted, and he
made his own decision. The following month, he refused to renew
BCCI’s license to operate in Florida.

When Saphos’s strange letters were made public much later, the
Justice Department claimed it was all a misunderstanding. In fact,
identically worded letters were sent to state bank regulators in New

^Howard Metzenbaum of Ohio, Howell T. Heflin of Alabama, and Dennis DeConcini
of Arizona.

fWilliam Hughes of New Jersey, Mel Levine of California, Edward Feighan of Ohio,
and Charles Rangel of New York.

Containment

( 2.71

York and California. Saphos apparently never cleared the letters with
the U.S. Attorney’s office in Tampa. The bank knew about the letters,
however. Saphos wrote them after he was lobbied by BCCI’s criminal
defense lawyers, and he sent the lawyers copies of the letters.

Justice Department officials have strongly defended the plea bar¬
gain, arguing that it was not a sweetheart deal. If the case had gone to
trial, they say, it is unlikely that the penalty would have been any more
severe. Others are not so sure. Some observers say the government
went easy on BCCI and suspect that one reason it did so was that it
wanted the bank’s cooperation in the prosecution of Noriega. The
timing certainly fits this scenario. The United States invaded Panama in
December 1989, and Noriega turned himself in to U.S. authorities on
January 3 — thirteen days before the BCCI trial was to begin. Twenty-
three American soldiers and several hundred Panamanians lost their
lives in the invasion. The financial cost to American taxpayers was
$164 million. Because of these costs, there was tremendous pressure
on the Bush administration to secure Noriega’s conviction. The Justice
Department’s obsession with winning a guilty verdict became apparent
when the trial began in September 1991. Several notorious drug
traffickers were given reduced sentences or other favors for assisting
the prosecution. One of Noriega’s lawyers, Frank Rubino, joked that
the prosecutors had made so many deals that the trial “is going to
relieve prison crowding.” With the help of such witnesses, Noriega
was convicted in April 1992.

BCCI — as the dictator’s main banker — was in a unique position to
help the prosecution. In fact, one provision of the plea bargain was
that BCCI would assist the United States in its prosecution of other
persons. One official involved in Operation C-Chase openly acknowl¬
edged a link to the Noriega case. The day the BCCI plea bargain was
announced, Bonni Tischler, the head of the Customs office in Tampa,
told a reporter that she approved of the deal because the bank had
agreed to help in other drug cases, including the prosecution of
Noriega.

What about BCCI’s political connections? The Justice Department
has denied that lobbying affected its handling of C-Chase — a conten¬
tion supported by an investigation ordered by Congressman Charles E.
Schumer of New York. But several observers suspect that influence
peddling played a role.

William von Raab, who served as the Customs commissioner until
July 1989, has testified that the government took a “constant pound-

FALSE PROFITS

272 )

ing” from “influence peddlers who either had been flattered, bought,
or were just plain on contract to BCCI.” He singled out Clifford,
Altman, and Hill and Knowlton’s Frank Mankiewicz. * “Therewasn’ta
single influence peddler who wasn’t being used to work this case,” von
Raab said. “The result was that senior U.S. policy-level officials were
constantly under the impression that BCCI was probably not that bad,
because all these good guys that they play golf with all the time were
representing them.” Von Raab called the plea bargain “a real triumph
of the Washington power broking establishment.”

One of the leaders of this “power broking establishment” was, of
course, Clark Clifford.

Clifford and Altman used to reassure BCCI executives that the drug
money case could be taken care of, according to a former official of the
bank. Some of the bankers took this to mean that their lawyers would
pull strings in Washington. “It’s a perception you’re born with in the
Third World,” he says. “You think anyone is for sale.”

Internal records make it clear that BCCI intended to use political
influence to fight the indictment. On December 1, 15)88, M. M. Ah¬
med, a former Pakistani diplomat employed in BCCI’s Washington
representative office, sent a memo to Naqvi outlining “the legal, regu¬
latory, the public relations, and the political aspects of the Tampa
indictments against the BCC and nine of its officials.” Under the
heading “Political aspect,” Ahmad included these items:

• “Contact with Bush administration by friendly Arab countries
and Pakistan.”

• “Activization of other contacts with well-connected persons
known to us in USA.”

There is also no doubt that Clifford and other lawyers for BCCI
tried to use political influence to squelch the Kerry Committee’s inves¬
tigation and to silence critics of the plea bargain.

In February 1989, Clifford and some of his law partners developed
a sudden interest in Kerry’s political career. Clifford, Altman, John R.
Kovin, and J. Griffin Lesher each contributed $1,000 to the senator.
(Kovin and Lesher both did legal work related to BCCI.) Clifford gave

* Mankiewicz took exception to von Raab’s testimony, insisting that he had worked on
behalf of First American, not BCCI. This, of course, is hair-splitting, since he reported to
Altman, a lawyer for both banks. In addition, Mankiewicz’s firm had previously done PR
work for BCCI.

Containment

( 2.73

Kerry another $1,000 in June 1990."* When Clifford was later asked
about his 1989 donation, he said, “There was nothing unusual about
it. Every time Kerry has run I have contributed to him. I have a group
of Democratic senators and congressmen and I contribute to them
every time.” In fact, federal records showed that he had never contrib¬
uted to Kerry before. When confronted with this fact, Clifford said his
remark about earlier contributions was simply a mistake.

Through a curious coincidence, Frank Mankiewicz also donated
$1,000 to Senator Kerry in February 1989 — his only direct contribu¬
tion to any federal candidate in the 1989-90 election cycle. In May
1990, Clifford gave $1,000 to Senator Claiborne Pell.t As chairman of
the Foreign Relations Committee, Pell controlled the purse strings of
Kerry’s subcommittee.

Kerry has said that he did not solicit Clifford’s contribution, and
there is no indication that he was influenced: he continued to investi¬
gate BCCI. Some of his Senate colleagues, however, showed little
inclination to probe the bank. Kerry said later that he tried to get
support from Joseph Biden of Delaware, the chairman of the Judiciary
Committee; Donald Riegle of Michigan, the chairman of the Banking
Committee; and George Mitchell of Maine, the majority leader. “It
was like pulling teeth,” Kerry later said.

BCCI and its allies used other politically connected law firms in
Washington besides Clifford & Warnke. Sheikh Zayed was repre¬
sented by Patton, Boggs &c Blow. One of its partners, Thomas Hale
(“Tommy”) Boggs, Jr., is one of the most powerful Democratic fixers
in town. Another partner, Ronald H. Brown, is chairman of the Dem¬
ocratic National Committee.

The senior partner of Barcella’s law firm was Paul Laxalt, who had
been the governor of Nevada and then a U.S. senator. He was a close
friend and major political backer of President Reagan and had chaired
Reagan’s campaign committees in 1976, 1980, and 1984.

John C. Culver, a former Democratic senator from Iowa, was a
partner in Ray Banoun’s law firm. In early 1989, Jack Blum recalls, he

* Earlier, Kerry had been involved in Democratic fund-raising activities with David Paul,
the chairman of CenTrust, the savings and loan association connected to BCCI. Kerry has
denied that he knew of CenTrust’s links to BCCI at that time, and there is no indication
that his ties to Paul affected his treatment of BCCI.

fBCCRrelated money also flowed to the Republican party. In 1989, Hassan Parvez, the
manager of BCCI’s Miami branch and a stepson of Swaleh Naqvi’s, gave two contributions
totaling $1,750 to the National Republican Senatorial Campaign Committee. He was
apparently invited to a June 1989 fund-raising dinner at which President Bush spoke.

FALSE PROFITS

2 74 )

received a telephone call from Culver asking for a draft copy of his
report on BCCL When Blum refused, Culver told him that Kerry had
said it was all right. “I said, ‘Excuse me, but when I’m told to give you
a copy by Senator Kerry, I’ll give you a copy.’ That was the last I heard
from him.” Culver popped up once again when Kerry complained to
Clifford the following July about BCCFs failure to turn over docu¬
ments concerning Noriega (the ones discovered by British Customs).
In response, Banoun and Culver visited Kerry. Culver had little to do
with the BCCI case, but, as a liberal Democrat, he was the kind of
person who might impress Kerry.

BCCFs political clout became apparent after the plea bargain, when
the bank was defended by a powerful Republican senator, a former
British prime minister, and a former president of the United States.

On February 22, 1990, Senator Orrin Hatch, a Utah Republican, gave
a speech in the Senate chamber about BCCI. As an influential member
of the Judiciary Committee (which oversees the Justice Department),
he was likely to be taken seriously. Hatch strongly defended the plea
bargain and attacked members of Congress who had criticized it. He
even praised BCCFs management “for the responsible way the com¬
pany has responded to the charges.” He called BCCFs willingness to
cooperate with the authorities “the kind of reaction one might hope to
see from a responsible corporate citizen.”

The effusive praise is not the only strange thing about the speech. It
was filled with inaccurate and misleading statements. Hatch portrayed
C-Chase as a case in which a handful of low-level employees had been
engaged in money laundering without the knowledge of their superiors
and “in violation of the bank’s own written rules.” This, of course,
ignored the superseding indictment, which stated that the laundering
of drug money was part of BCCFs “corporate strategy.” The senator
also lumped BCCI with institutions like Bank of America and First
National Bank of Boston, even though they had not been accused of
laundering drug money. (They had committed a much less serious
offense: failing to hie currency transaction reports.)

Hatch said the allegation that BCCI was “Noriega’s bank” consti¬
tuted “guilt by association,” partly because other banks had deposits
from the Panamanian dictator. This remark ignored BCCFs intimate
relationship with Noriega, as reflected in Awan’s testimony to the
Kerry Committee. Hatch said that most of the money belonged to the
Panamanian Defense Forces when, in fact, BCCI records showed that
Noriega had personal control over the funds and treated the money as

Containment

( 2 75

his own property. Hatch also ignored the BCCI documents discovered
by British Customs, which revealed that BCCI had helped Noriega
hide his money after he was indicted.

Toward the end of his speech, Hatch suggested that BCCI might
have been the victim of ethnic prejudice. He said that “we must be
aware that efforts to make an example of this foreign bank . . . could
be seen by some as discriminatory. It will not be lost on the interna¬
tional community — including our friends in the Middle East — that
BCCI’s critics seem to be singling out this foreign bank for unusually
harsh, punitive treatment.”

Shortly afterward. Hatch was asked to explain what had prompted
his speech. He said that he had been briefed by Justice Department
officials and by four BCCI lawyers: Robert Altman, Larry Wechsler,
Larry Barcella, and Ray Banoun. (In his speech, Hatch said that he had
been briefed by the Justice Department but neglected to mention the
defense lawyers.) He said, “It’s no secret that some of these guys were
concerned that their client was being seriously slandered and libeled
and they were concerned that some of the people up here on the Hill
would be misled.”

Hatch’s concern about people being misled is, of course, admir¬
able. Unfortunately, the senator made several remarks suggesting that
he had been misled more than anyone. “The bank had relatively little
to do with Noriega,” he said. “What the bank did do wrong was
strictly wire transfers.” That remark is flatly contradicted by Awan’s
testimony to the Kerry Committee, in which he said that most of
Noriega’s deposits were in the form of cash. Hatch also referred to
the individual bankers in the Tampa case as “lower-tier” people. In
fact, BCCI — which tried hard to promote this line — was forced to
admit in a press release that Nazir Chinoy was a “relatively senior
person.”

Why was Senator Hatch so willing to believe the defense lawyers —
obviously not the most objective sources of information? He said he
was impressed that men of such caliber were making the case.
Wechsler and Barcella, he noted, “are former prosecutors, and so I
relied fairly heavily on them.” Referring to Altman, the senator said, “I
know him well.”

Hatch’s friendship with Altman wasn’t the senator’s only connec¬
tion to BCCI. Many months later, as we shall see, journalists and
government investigators would discover several other curious ties
between the senator from Utah and the BCCI network.

FALSE PROFITS

276 )

Two political figures much more prominent than Hatch also defended
BCCI in early 1990: former president Carter and former British prime
minister Callaghan. Both men, as we have seen, were beneficiaries of
BCCI’s financial largesse.

Carter’s initial reaction to the indictment was to play down his
relationship with BCCI. Immediately after it was announced, he said
that BCCI was “one of a large number of contributors to Global 2000.
We have more than 200. I don’t know how much money they’ve
pledged to Global 2000.” At best, this was disingenuous, since BCCI
was by far the biggest donor. In the months that followed, Carter
continued to associate with BCCI officials. In the summer of 1989 —
after the superseding indictment had accused the bank of laundering
money as a matter of corporate policy — Carter visited Nigeria with
BCCI officials, including Swaleh Naqvi.

Of course, it could be argued that the former president wanted to
avoid judging BCCI before the verdict, but he even spoke up for the
bank after the guilty plea. In a February 1990 interview with the
Atlanta Constitution , Carter said that Global 2000 would continue to
accept donations from BCCI because, without that money, u we would
have to cancel all of our projects in Africa and Asia.” This is odd in
view of his earlier remark that BCCI was just one of hundreds of
donors. More important, he dismissed the drug money case as an
“unfortunate incident” involving “a few unsavory characters.”

On April 23, Callaghan defended BCCI’s management on the floor
of the House of Lords during a debate on money laundering. “I have
no hesitation in saying that in my judgment they are certainly people of
the highest integrity and probity,” he declared. “The purpose and
philosophy of the bank are honorable and those who are at the head of
it are fit and proper people to control it.”

In subsequent months, some of BCCI’s attorneys tried to use their
political influence to thwart congressional investigations, according to
a confidential memorandum by Roma W. Theus II of Holland St
Knight, the law firm in Miami that assisted BCCI in the Tampa case.
The memo, dated September 24, 1990, was apparently based on infor¬
mation obtained from a “mole” inside the Senate. In one passage,
Theus wrote that Altman and another BCCI lawyer, Raymond
Banoun, were “opposing the subpoenas” issued by the Kerry Commit¬
tee and that they were “doing everything within their power to call in
'political markers.’ ”

Containment

( z 77

The Justice Department has argued that BCCFs plea agreement did not
preclude it from continuing to investigate the bank, since it was bind¬
ing only on the U.S. attorney in Tampa. Nevertheless, many important
leads developed in Tampa were either ignored or not pursued aggres¬
sively. Shortly after the Tampa prosecutors met with Jack Blum’s infor¬
mants, they started a grand jury investigation of First American, but it
was “temporarily suspended” in October 1989. When asked a few
years later to explain this, Mark Jackowski compared the BCCI case to
a meal. The money laundering charges in the C-Chase indictment were
the “main course.” First American and the other issues were the “des¬
sert.” Fie also belittled the importance of Blum’s informants, referring
to one of them as an “alleged witness,” and said the information they
provided “appeared to be primarily hearsay, gossip, rumor, and innu¬
endo.” He also asserted that Blum said he wanted to be paid for any
future assistance — a charge that Blum denies.

After the plea bargain, Jackowski and his colleagues proceeded with
the “main course” — the money laundering case against the individual
BCCI bankers. Somehow, they never got to the “dessert.”

On January 16, 1990, the trial of five BCCI bankers — Amjad
Awan, Akbar Bilgrami, Sibte Hassan, Ian Howard, and Syed Aftab
Hussain — began in Tampa. It quickly became clear that the biggest
culprit was absent: BCCI. In his opening statement, Assistant U.S.
Attorney Michael Rubenstein echoed one of the allegations in the
superseding indictment — that the laundering of drug money reflected
the bank’s corporate policy: “The Bank of Credit and Commerce
International had a clear, well-defined corporate policy that came
down from the highest levels of the bank to take in as many deposits as
you can, as fast as you can, and not to be too careful about where they
came from.” He went on to say that the bankers did not launder drug
money for their personal gain but “to advance their careers at BCCI.”

On July 29, the jury returned guilty verdicts against the five bankers.
They were sentenced in December. Awan and Bilgrami got the stiffest
penalty: twelve years in prison and a $100,000 fine. Hussain was
sentenced to seven years and three months in prison, Howard to four
years and nine months, and Hassan to three years and one month.
Awan could have been sentenced to nineteen and a half years, but
Judge Hodges said he was lenient because Awan did not profit person¬
ally from the laundering. Most of the sentences were later reduced,
including Awan’s. One way in which Awan earned goodwill was by
testifying at Noriega’s trial.

FALSE PROFITS

278 )

Two defendants connected with BCCI, Asif Baakza and Syed Ziaud-
din Ali Akbar of Capcom, were tried in London for conspiring to
launder drug money. Baakza was convicted in September 1990 and
sentenced to two years in prison, but half the sentence was suspended.
Akbar was found guilty in October; he was sentenced to eighteen
months and fined the equivalent of about $ 100,000. Nazir Chinoy was
extradited from Britain to the United States in April 1991. He pleaded
guilty in December to three counts of laundering drug money and was
sentenced in May 1992 to three years and ten months in prison.

The plea bargain in Tampa was a stunning victory for BCCI. Thanks
to the effectiveness of its lawyers and lobbyists — and the weaknesses
of the opposition — the bank avoided the trauma of a long trial. What
is more, bank regulators allowed it to remain in business — except in
Florida, where Gerald Lewis refused to renew its license.

Shortly afterward, Swaleh Naqvi sent a message to BCCI’s employ¬
ees in which he reveled in the victory, writing: “Our conscience is
clean, our intention is clear. We shall through individual and joint
effort achieve what we have set out to achieve. The divine forces lead
to a common good, towards universal good, towards the good of all
humanity.” Naqvi also sent his thanks to Clark Clifford. “On behalf of
BCC and on my own behalf kindly accept our gratitude for guiding us
in the most traumatic experience,” he wrote. “We were guided by your
wisdom, experience, realisms and purity of your relationship with
BCC. Mr. Clifford, sir, you are aware of the moral values on which
BCC has been founded. We all thank God for his mercy and benef¬
icence.”

In Naqvi’s Orwellian doublespeak, BCCFs “moral values” meant
fraud on a massive scale. After the plea bargain, BCCI collected mil¬
lions of dollars in fresh deposits from customers all over the world
while its top managers stole the money through fraudulent loans and
other scams. It was business as usual.

Federal prosecutors had stopped probing BCCI’s ties to First Ameri¬
can, and the two banks continued to do business with each other.
Shortly after the plea bargain was approved, two First American of¬
ficials even wrote to BCCI to say that the U.S. institution valued its
relationship with BCCI. The letter, dated February 21, 1990, was
signed by two executives of First American Bank of New York: Mau¬
rice Acoca, senior vice president and chief financial officer, and Man-
soor Shafi, vice president. (The letter was prompted by an article in the
Financial Times, which said the Federal Reserve wanted First Ameri¬
can to stop dealing with BCCI.) It reads as follows:

Containment

( 2 79

We bring your attention to the fact that recently an article appeared
in the Financial Times of February 13, 1990 ascribing certain com¬
ments to an unnamed senior First American officer. We have taken
exception to the report where it states that, in the future, our two
institutions shall not be dealing together.

To set the record straight, we wish to reiterate that First American
values the relationship between our two institutions, and we are
continually desirous of enhancing it. As you are aware, we are
maintaining about forty accounts of the BCC Group’s various loca¬
tions. Additionally, sizable credit facilities are also available in all
categories.

The cover-up of BCCI’s criminality might have continued for years if it
were not for a handful of people who felt a duty to expose it. One man
who played a crucial role in this process was Jack Blum, who had spent
months gathering evidence on BCCI — collecting documents, depos¬
ing witnesses, and meeting with informants. Blum had also turned
over many of his findings to federal prosecutors and even persuaded
some of his sources to meet with the prosecutors.

Instead of pursuing these leads, the Justice Department allowed the
bank to avoid the indignity of a trial and even spared it from further
investigation. The day after the plea bargain was announced, Blum
exploded: “I’m pissed. Enraged. What happened in Tampa shows the
power of BCCI to fix anything. What the government did in this
settlement is a fucking outrage.”

If the federal government was unwilling to investigate BCCI, Blum
was asked, who would do it?

“The State of New York.”

The Enforcers

The USS Harry F. Bauer was among the first ships to sail into
action in the days before the invasion of Okinawa in the spring of
1945, one °f the hardest-fought battles of World War II. In the two
and a half months of almost constant fighting, the American destroyer
downed thirteen Japanese planes and protected U.S. forces from air,
surface, submarine, and shore fire. The Harry F. Bauer continued to
fight — and to assist other vessels — even after she was severely dam¬
aged, with an unexploded Japanese bomb lodged in her hull.

The presidential citation extolling the “extraordinary heroism in
action” of the vessel and its company concluded: “A seaworthy, fight¬
ing ship, complemented by skilled and courageous officers and men,
the Harry F. Bauer achieved a notable record of gallantry in combat,
attesting to the teamwork of her entire company and enhancing the
finest traditions of the U.S. Naval Service.”

The executive officer of that ship was Robert M. Morgenthau, the
twenty-six-year-old son of Franklin D. Roosevelt’s treasury secretary,
Henry Morgenthau, Jr., and the grandson of the U.S. ambassador to
Istanbul who sought to expose and prevent Turkish pogroms against
Armenians during World War I. Morgenthau’s father almost certainly
enjoyed the closest friendship with FDR of all his cabinet officers. That
had allowed the treasury secretary considerable influence in foreign
policy and other areas usually outside the responsibility of his office.
All this changed at FDR’s sudden death on April 12, 1945. Henry
Morgenthau, Jr., not only lost his best friend, as he told the press, but
he was also soon out of a job.

The new president, Harry Truman, wanted his own team, including

( 2.80 )

( 28 I

The Enforcers

a young naval officer, Clark Clifford, who in July 1945 went to work
in the White House for James K. Vardaman, Jr., a naval aide to the
president. Like both Vardaman and Truman, Clifford was a Mis¬
sourian, although he had not known Truman before. Within months
of his move to the capital, and after a few poker games with Truman,
Clifford would succeed Vardaman and in time become an important
adviser to the president. His career as a Washington insider was safely
launched. Truman’s favorite poker companion, according to Clifford,
was Fred Vinson, Morgenthau’s successor at Treasury. Clifford, in his
memoirs, would judge “Henry Morganthau” (sic) one of the “hold¬
overs from the Roosevelt administration” who had “a style that was
incompatible with that of President Truman.” It’s certainly hard to
imagine FDR and his cerebral friend Morgenthau settling down to
play poker together on the presidential yacht Williamsburg, as Tru¬
man and his cronies liked to do. Although Clifford and Robert Mor¬
genthau had both been wartime naval officers and would both become
famous lawyers, their paths wouldn’t even cross until almost half a
century after World War II.

A kinsman of such prominent financier families as Lehman and
Wertheim, Morgenthau is a member of the German-Jewish East Coast
elite, the patricians of the American Jewish community. Among them
are the “Our Crowd” families of Straus, Sulzberger, and Loeb, who
have had a remarkable impact on American politics, business, and
culture. Following his family’s tradition of noblesse oblige, Robert
Morgenthau dedicated his life to public service. And the courage and
stubborn determination that he and his crew showed at Okinawa
became the hallmarks of his long and distinguished career as a New
York prosecutor.

As for many young people of his generation, for Morgenthau World
War II and the Holocaust shaped the rest of his life. He had a lucky
war, surviving twenty-four hours in the water after the sinking of his
destroyer as well as months of fighting off Okinawa. Even in peace¬
time, Morgenthau seemed to lead a charmed life. After Yale Law
School, he went to work for Robert Patterson, the former secretary of
the army who headed the law firm of Patterson Belknap & Webb. One
day in 1955, the two men were on their way to La Guardia Airport
when Patterson suddenly remembered some vital documents and sent
Morgenthau back to get them. It was the last time they saw each other.
The plane crashed, killing Patterson.

Morgenthau was politically ambitious, and he helped with Herbert

282 )

FALSE PROFITS

Lehman’s campaign for the Senate in 1949 against John Foster Dulles
and with John F. Kennedy’s campaign for the White House in i960.
The new president’s brother and attorney general, Robert F. Kennedy,
appointed Morgenthau U.S. attorney for the Southern District of New
York, which comprises Manhattan, the Bronx, and Westchester
County. Morgenthau held the post until 1970, two years after Presi¬
dent Nixon began trying to replace him. He had fallen afoul of the
White House, attempting to expose crimes committed by Americans
who used secret Swiss bank accounts; some of the malefactors had
contributed to President Nixon’s campaign. But after four years in
private practice, Morgenthau found his way back to public life. In
1974, he was elected to the first of five consecutive four-year terms as
Manhattan district attorney/ 5.

Since the days of Thomas E. Dewey, who was elected district attor¬
ney in 1937 in a wave of outrage against public corruption, the Man¬
hattan D.A.’s office has had a reputation for not shirking cases, for
having loyal and smart people who take pride in their jobs and are
willing to work long hours for little pay. Dewey was succeeded by
Frank S. Hogan — “Mr. D.A.” — a legendary prosecutor who served
for thirty-two years, until 1973.

In his long career as a public prosecutor and politician, Morgenthau
has seen spectacular victories, controversies, and defeats, but he has
always maintained a stubborn and unswerving desire to bring home
his case no matter who is affected. He convicted the Democratic boss
Carmine DeSapio, but he never succeeded in convicting the notorious
New York lawyer Roy Cohn. Morgenthau’s 1962 run for governor of
New York was overwhelmed by Nelson Rockefeller, yet in his nearly
two decades as the Manhattan district attorney he has become a
legend, obtaining convictions against some of the nation’s toughest
criminals.

He “particularly enjoyed nailing big shots involved in white-collar
crime,” according to Mostly Morgentbaus , the family history written
by his elder brother, Henry Morgenthau III, a journalist and television
producer. It is the D.A.’s belief that, as he puts it, “crime in the streets”
prospers because of “crime in the suites.” The drug seller on a street
corner is able to peddle cocaine because he is assisted by financiers
prepared to launder money, businessmen who transport bales of nar-

*Thc official title is New York County district attorney; the Borough of Manhattan and
the County of New York are coextensive.

The Enforcers ( 283

codes, accountants who connive in tax evasion, and bank regulators
who look the other way as drug money passes through the payments
system.

Robert Morgenthau ordinarily wouldn’t have the authority to take
on an international bank like BCCI. But if the right person showed him
a way to get started, he would make the most of the opportunity.

When Jack Blum left the Kerry Committee at the end of March 1989,
he had been probing BCCI for a year. He shared some of his findings
with the federal prosecutors in Tampa, but he had serious doubts that
they would follow up. While some at the working level in Customs and
the IRS were enthusiastic, resources were scarce, and Blum suspected
that senior officials were unwilling to go very far. He decided against
trying other avenues in Washington, believing that was, as he put it,
“way too treacherous” and ran the risk of being smothered by lawyers
and lobbyists.

Blum knew that Morgenthau routinely worked on major fraud
cases and had a reputation for incorruptibility. As he later explained,
“This isn’t a guy who is going to be shut down by two or three fixers
sliding in and saying [their] client didn’t do anything.” With the en¬
couragement of Senator Kerry, Blum decided to call on Morgenthau.

Blum was familiar with the Manhattan D.A.’s office; he had almost
gone to work there after graduating from law school in 1965. “I was
screened by all the underlings, and they were all ready to hire me,”
Blum recalled. “In the final interview, they dropped it on me: it would
pay something like $4,800 a year and you were required to live in
Manhattan. The interview took place on a winter day. My memory of
this is that I go there and the heat is up full blast — and the pervasive
smell is urine coming off the radiators. The combination of $4,800,
you have to live in Manhattan, and the smell — I couldn’t hack it.”

Years later, while working for Senator Kerry, Blum met Morgen¬
thau. When the Kerry Committee held hearings on drug trafficking in
early 1988, Morgenthau was one of the witnesses. Morgenthau, in
turn, had learned something about BCCI: some of the other witnesses
had identified BCCI as Noriega’s bank.

In April 1989, Blum flew to New York to meet with Robert Morgen¬
thau.

The Manhattan district attorney’s office is a couple of blocks from
City Hall, at One Hogan Place (named after Morgenthau’s noted
predecessor). A heavy but impressive Art Deco complex, it was built

FALSE PROFITS

284 )

during the Depression to house the New York County prison and
courthouse. Above the entrance to the courthouse is the inscription:
“Where law ends, there tyranny begins.” Inside is a warren of offices,
many of them in need of paint, where heavy old rotary telephones were
the rule long after most of the city worked with sleek push-button
models. Lawyers, cops, and suspects stride and shamble through the
shabby corridors that echo with voices and slammed doors.

Behind a locked and guarded door are the offices of Morgenthau
and his senior aides. The office of “the Boss,” as he is called by his
staff, is a long, rectangular, untidy room filled with memorabilia,
such as a huge Pat Oliphant cartoon of Nixon desperately trying to
stop Morgenthau — wearing a Sherlock Holmes deerstalker hat —
from prying into the Swiss bank accounts of the president’s backers.

Blum took a seat in Morgenthau’s office that April day and began
dramatically: “I want to tell you about the biggest bank fraud in the
world.”

BCCI, according to Blum, was deeply involved with dirty money,
laundering funds for some of the world’s most notorious drug barons.
What is more, he suspected that it secretly owned several U.S. financial
institutions, including First American Bankshares, the biggest banking
company in Washington. He also suspected that BCCI was defrauding
its depositors. Much of the bank’s capital appeared to be phony, which
would mean that it had collected billions of dollars in deposits under
false pretenses. The whole thing, according to Blum, could be a mas¬
sive Ponzi scheme.

He also mentioned the possibility of political corruption. In 1987,
he said, First American bought National Bank of Georgia from Ghaith
Pharaon after the Georgia legislature changed the state banking law to
make the takeover possible. Blum had heard from BCCI insiders that
some members of the legislature had been bribed to alter the law.
When asked why federal authorities in Tampa couldn’t handle the
case, he said, “I don't think Tampa is equipped, and I don’t think
Tampa wants to hear about it.”

When Blum was partway into his account, Morgenthau summoned
one of his deputies, Michael Cherkasky, to sit in on the extraordinary
tale. It appeared that the New York prosecutors were taking Blum
seriously. (Blum didn’t realize it at the time, but there was, in fact, a fair
degree of skepticism at first. John W. Moscow, an assistant D.A., later
told friends that Blum’s story was so bizarre that prosecutors laughed
about it for ten days.)

The Enforcers ( 285

One potential problem for Morgenthau was jurisdiction. Whereas
the U.S. Justice Department can handle cases anywhere in the country,
he could only prosecute crimes committed in New York State. Blum
pointed out that many of BCCI’s alleged crimes had in fact occurred in
Morgenthau’s backyard. A large part of the drug money laundered by
BCCI passed through New York, channeled through the dollar pay¬
ments system operated by the Federal Reserve Bank of New York. In
addition, First American Bankshares owned a bank based in Manhat¬
tan: First American Bank of New York. If BCCI had lied to the Federal
Reserve Board about the ownership of the holding company, it had
also lied to the New York State Banking Department about the owner¬
ship ofFABNY.

Blum had turned up at an opportune time. In recent years, Morgen¬
thau had been overshadowed by Manhattan’s chief federal prosecutor,
U.S. Attorney Rudolph Giuliani. Occupying the post Morgenthau had
held years earlier, Giuliani had attracted enormous publicity by crack¬
ing down on insider trading on Wall Street. The press had begun to fuel
a perception that Morgenthau’s star was fading, that Giuliani was
more effective at combating white-collar crime. Nobody knew then
that few of Giuliani’s indictments would stick: many defendants were
found not guilty; others had their convictions overturned on appeal.

Morgenthau decided to conduct his own probe of BCCI, and he
assigned one of his best prosecutors to the case: John Moscow. The son
of a famous New York Times reporter, Moscow looks every inch a
Victorian prizefighter, with a Roman nose and stocky build. His habit
of rocking back and forth on the balls of his feet only serves to
accentuate the image. A Harvard Law School graduate, he could prob¬
ably earn far more in the private sector than the $90,000 salary he
earns in the D.A.’s office, but money has been less attractive to him
than the chance to prosecute challenging crimes. He had chased down
con men who had forged bonds supposedly issued by the government
of Indonesia. He had also worked on the John Grambling case of the
mid-1980s, a complex fraud through which a young financier had
bilked banks out of millions of dollars. Brian Rosner, who was the lead
prosecutor on the Grambling case, describes Moscow as “a tough,
hard-nosed prosecutor. He’s one of the best trial attorneys down there.
His success record [was sometimes] spotty — because he took on cases
that nobody else even wanted to touch. He has a superb relationship
with Morgenthau. They’re on the same wavelength.”

With his Big Apple lapel button and his quick one-liners, Moscow is

286 )

FALSE PROFITS

a quintessential New Yorker. When he suspects that a defense lawyer is
playing him for a fool, he’s likely to say, “I may have been born at
night, but it wasn’t last night.” Some of his more cryptic remarks later
prompted Federal Reserve investigators to nickname him “the Rid-
dler.” Critics sometimes accuse Moscow of being a hothead, of push¬
ing too hard, of bullying, but no one denies his energy and intelligence.

Morgenthau and Moscow, as it turned out, would be Jack Blum’s
last best hope of getting any justice in the BCCI case. Blum’s fear that
the federal government was either unable or unwilling to mount an
aggressive probe turned out to be justified.

Even before the October 1988 indictment of BCCI, there were signs
that the Justice Department wanted to limit the inquiry. The investiga¬
tion was brought to a close that month over the objections of Robert
Mazur. The Justice Department also played down the importance of
the arrests by failing to reveal that Noriega’s banker, Amjad Awan,
was one of those in custody. There was also some peculiar behavior by
two other federal agencies, the CIA and the Federal Reserve.

Around the time of the indictment, William von Raab, the Customs
commissioner, contacted William Gates, the CIA’s deputy director
(and currently the director), and asked if the agency had any informa¬
tion about the bank. Gates quipped that BCCI was known as “the
Bank of Crooks and Criminals” and gave the Customs chief a report
the CIA had prepared. It was a skimpy document, von Raab later said,
which was of little value to investigators. Gates never told von Raab
that the CIA had prepared several other reports over the years, some of
which mentioned the bank’s close relationship with First American.

The Federal Reserve Board — the country’s premier bank regula¬
tor — did not seem particularly eager to probe BCCI’s relationship
with First American. This indifference went back nearly a decade.
When the Fed permitted a group of BCCI’s clients to take over the
company in the early 1980s, it brushed aside a vast number of clues
that they were front men for BCCI, such as the large overlap between
the shareholder groups of the two institutions. During the Customs
drug money investigation, new information on BCCI’s ties to First
American emerged. On at least three occasions, Awan told Mazur that
he thought BCCI secretly controlled First American. On December 27,
1988, David Burris, an IRS agent attached to C-Chase, spoke with
William Ryback, the deputy director of banking supervision at the
Fed. When Burris told the regulator about Awan’s remarks, the reac-

The Enforcers ( 287

tion was surprisingly lukewarm. Unless the IRS agent could provide
documentary evidence to support Awan’s allegations, Ryback said,
there was little the Fed could do.

Burris made another attempt the following February. Accompanied
by his supervisor, Maurice Dettmer, he flew to Washington and met
with Ryback. They briefed him on the evidence they had obtained and
even offered to provide him with witnesses. Once again, the Fed of¬
ficial seemed to show little interest. (Ryback has asserted that no
witnesses were mentioned.) Later that month, the Fed gave the BCCI-
First American relationship a clean bill of health. The Federal Reserve
Bank of Richmond said in a report that there were “no irregularities”
in the relationship and that the original commitments about the own¬
ership and control of First American had been complied with. The
report made no mention of the information provided by the IRS. That
same month, the Fed allowed First American to take over a Florida
bank: Bank of Escambia in Pensacola. There were other strange inci¬
dents in 1989. Jack Blum, as we have seen, persuaded two former
BCCI officials to meet with the federal prosecutors in Tampa in
March. Both informants said they believed that BCCI controlled First
American. The federal prosecutors issued a few subpoenas but did
little else to investigate these allegations.

While the Justice Department and the Federal Reserve dawdled, the
Manhattan district attorney’s office mounted an aggressive investiga¬
tion of BCCI. Morgenthau would eventually uncover new information
on BCCI’s relationship with First American. The New York prosecutor
would also discover that BCCI was a corrupt financial empire of vast
proportions.

John Moscow started out with valuable leads provided by Blum. He
quickly developed his own informants, including former officials of
BCCI and First American. The federal prosecutors, of course, were in a
position to help, but they showed little inclination to do so. Justice
Department officials have claimed that there were “procedural” prob¬
lems that made it difficult for them to cooperate, but there was clearly
more to it. In fact, it seemed that the federal prosecutors were going
out of their way to hamper the probe. Telephone messages left by
Morgenthau with his federal counterparts were ignored. On at least
one occasion, Morgenthau said, he was even forced to send a fax to the
U.S. attorney in Tampa “asking him to please answer his telephone.”
Moscow’s reaction was much more blunt. When someone asked him

FALSE PROFITS

288 )

about the federal prosecutors, he growled, “Cooperation with the
Justice Department? Hand me the Vaseline.”

One incident concerned the tapes that the Tampa prosecutors had
made of Blum’s informants. Blum says he never told Moscow about
the tapes because he had promised that their existence would remain
confidential, and he did not want to give anyone an excuse for accus¬
ing him of compromising the federal government’s case against BCCI.
Somehow, Moscow learned about the tapes and asked the U.S. at¬
torney’s office in Tampa for copies. For months, said Moscow, Tampa
insisted that there were no such tapes, at one point sending back letters
that, in one investigator’s eyes, were “insulting to Morgenthau.” Mos¬
cow persisted anyway. (He called Tampa’s denial “the Easter Bunny
story”; it amused him, but he didn’t believe it.) Eventually, according
to Moscow, Tampa “found” the tapes and claimed that they had been
mislaid. (Officials in the U.S. Attorney’s office in Tampa recall things
quite differently. One prosecutor says the existence of the tapes was
not revealed at the outset because of the need “to protect confidential
relationships.” He and his colleagues also insist that they gave consid¬
erable assistance to Morgenthau’s office.)

Moscow managed to gather a great deal of information about
BCCI, and he began to share many of his findings with the Fed, partly
because he hoped that the bank regulators would help him. In August
1989, for example, Morgenthau’s office provided information on First
American to a Federal Reserve investigator: one of the D.A.’s infor¬
mants had stated that BCCI owned or controlled First American. (In
an internal memo, the Fed investigator wrote that “the allegation that
BCCI owns First American is serious, and is an allegation that we have
heard from other law enforcement agencies.”) In spite of his progress,
Moscow knew that he would have to get documentary evidence to
back up his informants’ allegations. Bank regulators in Europe were
beginning to obtain just the kind of evidence he needed, but it would
be months before he could get it.

Since the 1970s, there had been complaints that BCCI was poorly
regulated. One reason was that each regulator had only a partial view
of the group. There was a similar problem for the auditors. For most of
BCCI’s existence, the Luxembourg holding company and bank were
audited by Ernst &c Young (then called Ernst & Whinney). Another
firm, Price Waterhouse, audited the Cayman Islands holding company.

Not until the late 1980s were steps taken to deal with this structure.
In 1987, Ernst & Young resigned and Price Waterhouse became the

The Enforcers ( 289

sole auditor for the main components of the BCCI group. The follow¬
ing year, bank regulators formed a committee to coordinate supervi¬
sion of the bank. Called the College of Supervisors, it included rep¬
resentatives of Luxembourg, Spain, Switzerland, and the United
Kingdom."' It began meeting in May 1988. Despite these reforms, the
auditors and the regulators remained oblivious of the extent of BCCI’s
criminality. Incredibly, no one detected the massive Ponzi scheme that
siphoned billions of dollars out of the bank.

Eventually, several forces converged to prod the regulators to take a
closer look at the bank: the Tampa indictment, concerns about BCCI’s
financial stability, and the Morgenthau investigation. In the fall of
1989, the Bank of England and the Institut Monetaire Luxembour-
geois asked Price Waterhouse to conduct the first of a series of special
audits of BCCI.

In the past, Price Waterhouse had shown a singular lack of aggres¬
siveness in its audits of BCCI. When, for example, the auditors asked
about major loans on BCCPs books, bank officers would often refuse
to identify the borrowers, invoking “client confidentiality.” By accept¬
ing such nonanswers, Price Waterhouse had no way of determining
whether the loans were going to be repaid — or if they were fraudulent
transactions aimed at stealing money from the bank. This time, how¬
ever, the auditors took a much tougher approach. They insisted that
major borrowers confirm in writing that they actually owed the money
that the bank said they did. Around the end of 1989, Price Waterhouse
began providing some of its findings to the College of Supervisors.
Additional reports were submitted in early 1990. (In March, BCCPs
Swaleh Naqvi made a great show of assisting in the inquiry by setting
up a special task force. It was, of course, an absurdity — since Naqvi
had been in charge of the looting of BCCI.)

The Price Waterhouse reports make horrifying reading. A report
submitted in January portrayed BCCPs accounts as a shambles, saying
that there were “no loan agreements” on many of its largest loans. In
many cases, there were no official, third-party witnesses to sums total¬
ing hundreds of millions of dollars. Furthermore, in many cases there
weren’t proper appraisals on which these loans should have been
based. Subsequent reports went even further. They highlighted the
frequent absence of critical information to back up huge loans, irregu-

*Hong Kong and the Cayman Islands joined in 1989, the UAE in 1990, and France in
1991. The Federal Reserve never joined the panel.

FALSE PROFITS

29° )

lariries in loan approval procedures, unreliable management represen¬
tations, and other dubious practices. Some of the questionable loans
were in the names of Kamal Adham and his associate Abdul-Raouf
Khalil. The Khalil loans hadn’t been properly serviced for five years.

There were also indications that large sums of money had been
siphoned out of the bank. The early 1990 audits, for example, de¬
scribed irregular transactions that caused hundreds of millions of dol¬
lars simply to vanish.

Price Waterhouse also found that BCCI had made huge loans to
some of its own shareholders and that the borrowers used BCCI stock
as collateral. The report of April 3, 1990, showed that BCCI had
apparently lent its own shareholders $1.48 billion against security of
about 60 percent of the bank’s shares. At the very least, this showed
that the bank was involved in the massive manipulation of its own
share price. But there was a much more frightening possibility: it could
mean that much of BCCI’s equity capital was fictitious.

Ever since its founding, BCCI had reassured depositors by saying
that wealthy Arab sheikhs had injected millions of dollars in equity
capital into the bank. But if most of these shareholders had really
bought the shares with BCCI loans — and were not obliged to repay
the debts — it would mean that they were straw men. BCCI, in other
words, may have manufactured equity capital out of thin air and had
merely “borrowed” the names and reputations of wealthy Arabs to
bolster confidence in the bank.

The Price Waterhouse audits shed light on another important mys¬
tery: the true ownership of First American Bankshares.

When BCCI’s clients sought permission to acquire First American,
they assured the Fed that they were investing their personal funds —
supplemented by money borrowed from banks not related to BCCI.
Price Waterhouse discovered that several stockholders had borrowed
heavily from BCCI, putting up their First American stock as collateral.
This alone violated the agreement with the Fed. Beyond that, several of
the investors failed to make interest payments, which enabled BCCI to
take possession of the shares. * It was later estimated that BCCI wound

*The March 18, 1990, Price Waterhouse report described a chaotic situation. BCCI’s
“task force” found the arrangements under which shares in First American’s holding
company were pledged to BCCI as “informal,” with the bank holding share certificates and
signed blank transfer forms backed by powers of attorney. To complicate matters further,
there were several cross pledges under which one borrower’s shares were pledged against
another’s loans.

The Enforcers ( 291

up with at least 60 percent of First American’s stock. This was the
“smoking gun” — the proof of what had been suspected for so many
years: Arab investors who held a majority of First American’s stock
were merely front men. BCCI secretly owned First American.

Since late 1988, the Federal Reserve had done little to pursue the
allegations about First American because, as Ryback maintained, there
was no documentary evidence. Now the evidence had been found. In
late 1989, when the Bank of England obtained information on the
secret ownership of First American, it informed the Federal Reserve.
The Fed’s reaction was incredibly mild. Instead of mounting an aggres¬
sive investigation, the central bank did little more than write to a BCCI
lawyer asking if the information was true! In a letter dated December
13, 1989, Ryback asked Altman if First American’s stockholders had
borrowed money from BCCI.

On February 5, Altman replied, “We don’t have access here to such
information.” He also enclosed a letter from Swaleh Naqvi deny¬
ing that BCCI had provided such financing; Naqvi wrote that “none of
the shareholders involved in the acquisition had any personal loans
from BCCI during the years 1981 and 1982.” Naqvi held open the
possibility that the shareholders may have borrowed from BCCI to
finance other parts of their businesses and holdings. The same day
Altman wrote to Ryback, the judge in Tampa approved BCCI’s plea
bargain.

The cover-up of First American’s true ownership continued — as did
the cover-up of the massive fraud against BCCI’s depositors.

The fraudulent loans uncovered in Price Waterhouse’s audits meant
that BCCI had suffered enormous losses. Price Waterhouse could not
possibly sign BCCI’s 1989 annual report — at least not without a
major qualification. A heavily qualified opinion would have been a red
flag to depositors, touching off a run on deposits. But there was
another alternative. If the shareholders could be persuaded to pump in
new equity, BCCI might be able to survive. The only major shareholder
in a position to do that was Sheikh Zayed.

Swaleh Naqvi had been running BCCI for two years — ever since
Abedi’s heart attack in early 1988. When it became clear that BCCI
desperately needed capital, he went to Abu Dhabi and pleaded with
the sheikh for help. Zayed, according to a former BCCI official,
spurned the banker’s appeal: “I can’t put in any more money,” he is
said to have told Naqvi. “You’ve done enough damage.” BCCI of-

FALSE PROFITS

292 )

ficials then enlisted Abedi’s help. If anyone could convince the sheikh
to rescue the bank, it would be Abedi.

While BCCI was living on borrowed time, its founder was living
with a borrowed heart. In spite of his frail condition, he agreed to
make a personal appeal to Sheikh Zayed. In early 1990, Abedi was
flown to Abu Dhabi. He waited patiently while Zafar Iqbal — the
leader of the bank’s Gulf faction — tried to arrange an audience with
the ruler. But Zayed did not want to see him, according to a BCCI
insider. “After about ten days,” says this source, “Zayed told Zafar
Iqbal, ‘Why don’t you take Mr. Abedi out of here because I don’t have
the heart to break his heart.’ ”

But the bankers persisted, and Zayed eventually agreed to back a
rescue plan at an estimated cost of $928 million. About half the money
was used to cover losses, with the rest replenishing BCCI’s equity. In
exchange, Zayed and investors connected with him (his son Khalifa,
the Abu Dhabi government, and the Abu Dhabi Investment Authority)
acquired 77 percent of BCCI’s stock. BCCI announced that some of
the stock had been acquired from the Bin Mahfouz family, which owns
National Commercial Bank, the biggest bank in Saudi Arabia. As part
of the package, Naqvi was replaced as chief executive by Iqbal — the
BCCI official closest to Zayed — representing the triumph of the Gulf
faction over Naqvi and his technocrats. (Naqvi remained on the bank’s
payroll, however.)

Zayed’s bailout meant that BCCI would be kept alive, but it still
posed a dilemma for Price Waterhouse. What should the auditors do
about the internal frauds they had discovered before the rescue opera¬
tion?

When BCCI’s 1989 annual report was issued on April 30, 1990, it
was duly signed by Price Waterhouse; the firm stated that it gave a
“true and fair” view of BCCI’s financial condition. There was no hint
of the widespread irregularities the auditors had uncovered. When
asked about this much later by the Wall Street Journal , Price Water-
house said that it gave a clean opinion because Abu Dhabi “was
committed to maintaining the capital of the bank.” What the firm was
saying, in effect, was that if a rich shareholder says he will prop up a
company, it doesn’t much matter what the financial statements say.

Although BCCI would remain in business, it would be a smaller
institution. It would close most of its U.S. offices and also trim its UK
branch network. In June, BCCI said it would lay off 4,000 of its
14,000 employees; in Britain alone, 900 employees would lose their

The Enforcers ( 293

jobs. In addition, BCCI would shift its headquarters from London to
Abu Dhabi. The move took place in September.

The restructuring of BCCI and the transfer of its headquarters oc¬
curred with the full blessing of the Bank of England and other regula¬
tors. It seemed to be a convenient solution to a messy problem. BCCI
would simply fold up its tent and creep away in the night. Of course,
this “solution” meant that BCCI’s crimes would remain concealed
from the public and that the culprits would not be punished, but those
shortcomings didn’t seem to bother the regulators at all.

Other people, however, saw this as an outrageous cover-up, notably
Robert Morgenthau and his team of prosecutors and detectives. John
Moscow pressed ahead with his investigation, and he mounted a
concerted effort to obtain copies of the Price Waterhouse reports. At
the same time, new information about BCCI — and First American —
was emerging in the press.

In 1988, Larry Gurwin began working as a free-lance financial jour¬
nalist in the Washington area. He had written about international
banking for several years and was familiar with BCCI and its shady
reputation. He also remembered the controversial takeover battle for
First American. In September, he offered to write stories about BCCI
for two publications: the Economist of London and Regardie’s, a
monthly business magazine in Washington. The story for the Econo¬
mist would seek to determine if BCCI’s dubious reputation was jus¬
tified; the Regardie’s article would focus on the ownership of First
American and its ties to BCCI. He did not know that bank was under
investigation at the time; no information had emerged publicly about
the probes of BCCI by U.S. Customs and the Kerry Committee. After
BCCI was indicted in October, both magazines suddenly became quite
interested in BCCI and Gurwin got his assignments.

By early 1989, he had located a number of former BCCI employees
who told him explicitly that the bank had secretly acquired control of
First American and a host of other organizations, including National
Bank of Georgia, Independence Bank in California, Capcom Financial
Services, Attock Oil, International Travel Corporation, and South
Publications. None of these sources was able to provide proof, but
Gurwin was able to find a great deal of evidence that BCCI had
suspiciously close ties to First American and these other entities. When
asked about this, spokesmen for BCCI flatly denied anything other
than “arm’s-length” relationships.

FALSE PROFITS

2-94 )

The most vociferous denials came from Robert Altman during an
interview in July 1989. It was hard to accept them at face value,
though, because a number of his statements were misleading. For
example, he gave a blow-by-blow account of the First American take¬
over battle without once mentioning the involvement of Bert Lance.
When asked about Lance, Altman denied that the Georgia banker had
recommended the stock to the Arab investors. Altman was also asked
if he had ever attended BCCFs annual management conferences, and
he said, “I went once.” When Altman was told in a follow-up inter¬
view that witnesses placed him at more than one conference, he admit¬
ted that he had been to two or three. (The correct number is three.)

When it was clear that Gurwin intended to proceed with the article
for Regardie’s , Altman attempted to have the story killed by threaten¬
ing libel action. In September 1989, Gurwin received a letter from
John W. Vardaman, Jr., of Williams & Connolly, saying, in part,
“Robert Altman . . . informs us that you have been inquiring into
whether First American is somehow owned or controlled by a foreign
bank holding company, the Bank of Credit and Commerce Interna¬
tional (BCCI). As Mr. Altman has informed you, this allegation is
absolutely false and would, if disseminated, cause serious injury to
First American.”

Other lawyers were enlisted in Altman’s campaign to kill the story.
Michael Barnes, a former Democratic congressman from Maryland,
worked for Arent Fox, one of the Washington law firms that repre¬
sented BCCI in the Tampa case. Although Barnes was not involved in
the BCCI case, he was an acquaintance of Bill Regardie’s, the publisher
of the magazine. Barnes contacted the publisher. The BCCI lawyer
Larry Barcella called the magazine’s editor, Brian Kelly, and suggested
that Gurwin was looking for facts to fit his own theories about BCCI
and First American. The magazine’s libel lawyer, Ed Weidenfeld, later
said he had never seen such a concerted effort to suppress an article.

Regardie did not succumb to the pressure, however. The story was
published in May 1990; it showed that there were extraordinarily
close ties between BCCI and First American — far from the “arm’s-
length” relationship claimed by BCCI and Altman. There was no
proof that BCCI secretly owned First American, but there was strong
circumstantial evidence. The story also revealed that at least $500,000
of Noriega’s money had been channeled through First American by
BCCI officers.

A few days after the article appeared, BCCI and First American had

The Enforcers ( 295

to deal with another public relations nightmare: a page 1 expose of
BCCI in the Wall Street Journal , written by Peter Truell and John
Fialka. They portrayed BCCI as a “rogue bank” that had broken
numerous banking and money-laundering laws. The story revealed
that CenTrust, the big Miami savings and loan association owned in
part by Ghaith Pharaon, had attempted to fool regulators about its
financial stability by parking millions of dollars in junk bonds at BCCI.
It also mentioned the overlapping shareholding between BCCI and
First American, noting that some believed there might be a degree of
ownership and control.

BCCI and First American did their best to limit the damage from the
two articles. In response to the Regardws story, First American distrib¬
uted an eight-page “Fact Sheet”: it claimed that the article was “filled
with innumerable errors and outright falsehoods.” One person who
passed out copies of the “Fact Sheet” was Frank Mankiewicz of Hill
and Knowlton.

On May 8, lawyers for First American met with William Ryback
and other regulators. Altman was accompanied by his law partner J.
Griffin Lesher and Baldwin Tuttle of Milbank, Tweed, Hadley &
McCloy. Altman attempted to discredit the Regardie’s and Journal
stories, but he did say he had heard that BCCI was owed between $400
million and $1 billion by First American’s shareholders. He added that
there were no loans to the Abu Dhabi shareholders. He had also been
told, he said, that these credits were properly documented by Price
Waterhouse.

Other measures were taken inside BCCI and First American to cope
with the negative publicity. BCCI’s top management circulated a
memo to senior officials around the world rebutting the Journal story.
At First American, employees who asked about the Regardie y s article
were given the “Fact Sheet.” On May 24, both stories were discussed
at a board meeting of First American. Clifford, according to minutes of
that meeting, “discussed in detail the events leading up to the publica¬
tion of the articles appearing in Regardie's magazine and the Wall
Street Journal newspaper in May which pertained to an alleged ques¬
tionable relationship between the Company and the Bank of Credit
and Commerce International (BCCI). He noted that the Company
and BCCI have both issued fact sheets for their own internal use
discrediting the articles’ unfounded disclosures and stating the correct
facts.”

Throughout 1990, BCCI officials struggled to maintain a facade of

FALSE PROFITS

296 )

innocence. The BCCI group was not, they contended, a criminal insti¬
tution but a respectable bank. The money laundering that had been
exposed in Operation C-Chase was not a reflection of BCCI’s corpo¬
rate policy but the work of a few renegade employees. The bank’s plea
bargain in Tampa was not really an acknowledgment of guilt; it was
aimed at avoiding a costly and protracted legal battle. The massive
losses revealed in the spring of 1989 were not the result of fraud but
the product of mismanagement. As for the First American connection,
BCCI and its American lawyers continued to insist that there was
nothing more than an arm’s-length relationship. BCCI and its allies did
their best to discredit critics and skeptics. When, for example, the
Kerry Committee asked First American to comment on the article in
Regardie's, Mankiewicz sent a copy of the “Fact Sheet” to Senator
Kerry. Jack Blum was portrayed as a crank; he later heard that BCCI
spokesmen had told at least one prominent politician that he had been
fired from Kerry’s staff.

The campaign of disinformation seems to have had some success,
particularly with regard to the First American connection. Price Water¬
house’s findings about BCCI’s ties to the bank were still secret. What is
more, Clark Clifford had given his word that the allegations were
false — and many people were inclined to trust him. One measure of
the success of the campaign is that few journalists followed up on the
Regardie's and Wall Street Journal stories. It would be many more
months before Clifford’s statements were seriously challenged by oth¬
ers in the media.

Behind the facade, BCCI’s financial empire was gradually crumbling.
Financial institutions close to BCCI — and BCCI itself — were in
serious trouble.

CenTrust Savings Bank was taken over by regulators in February
1990. It was eventually discovered that Pharaon, who supposedly
owned about a fourth of the S&L, had actually been a front man for
BCCI. The demise of CenTrust was blamed on bad real estate loans,
huge losses on its own junk bond portfolio, and the rampant over¬
spending of corporate funds on personal luxuries for the chairman,
David Paul. At the time, it was estimated that the cost to taxpayers
would be more than $2 billion — much more than if the regulators had
acted sooner. But BCCI’s bond-parking scheme had delayed the shut¬
down.

Another institution in the BCCI orbit was in severe trouble because

The Enforcers ( 297

of huge loan losses: Banque Arabe et Internationale cTlnvestissement.
BAII, the consortium bank in Paris, had long had very close ties with
BCCI, as noted in Chapter 4. Run by a board member of BCCI, Yves
Lamarche, BAII had played a critical role in some of BCCI’s dubious
schemes, lending $50 million to help finance the takeover of First
American and also providing funds to allow Pharaon to buy Indepen¬
dence Bank in Los Angeles. In both transactions, BAII had merely
fronted for BCCI. In the summer of 1990, BAII was taken over by
Banque Nationale de Paris at a cost of 600 million francs — more than
$100 million.

BCCI’s biggest satellite — First American Bankshares — was also
in trouble. Since 1989, Clifford had been working on a scheme to sell
the company. Goldman Sachs, a leading Wall Street investment bank¬
ing firm, was asked to find potential buyers. One institution that
expressed interest was NCNB Corporation (now called NationsBank),
a large bank holding company based in North Carolina. In a let¬
ter dated May 10, 1990, Christopher Flowers of Goldman said that
NCNB had submitted a preliminary offer of $1 billion. When word
of its interest leaked out in June, Clifford told the Washington Post
that “the bank isn’t for sale.” This remark was at best disingenuous,
since Clifford was the prime mover behind attempts to sell the com¬
pany.

In all probability, there was little likelihood of a quick and easy sale.
The economy in and around Washington, D.C. — the core of First
American’s business — had turned sluggish. The real estate market,
which had boomed through so much of the 1980s, was souring. Five of
six other banks approached by Goldman showed little or no interest."*

On September 27, 1990, Clifford told First American’s board that
he and Altman would be visiting the bank’s Arab investors in October

*This was one of several times that NCNB made a cameo appearance in the First
American story. In 1977, it was a member of the Middendorf group that bought control
of First American. Later that year, when Bert Lance’s associate Eugene Metzger suggested
selling the company to a foreign bank, he did so in a letter to an NCNB official.

A decade later, when First American bought National Bank of Georgia, Clifford and
Altman said they did so after engaging in a bidding contest against NCNB. The presence
of NCNB has helped them to argue that First American’s purchase of the Georgia bank
was an “arm’s-length” transaction.

NCNB’s “offer” for First American has also been useful to Clifford; he has cited it
repeatedly as proof that the company was well managed during his tenure as chairman.
Interestingly, investigators for Senator Kerry have found that Goldman Sachs approached
NCNB at Clifford's suggestion and that NCNB never conducted a serious study of First
American.

FALSE PROFITS

298 )

“to arrange for the possible injection of more capital.” On November
6, Clifford and Altman informed the board that they had requested a
$125 million bridge loan and a $30 million capital infusion from the
shareholders. When the year was out, the company had lost $158.5
million. (In May 1990 — in response to the Regardie's article — First
American had described itself as a highly profitable and well-capital¬
ized institution.)

While attempting to stave off a financial crisis at First American,
Clifford and Altman were themselves in jeopardy. The Regardie's ex¬
pose prompted the Washington Post to take a close look at First
American. Assigned to the story was Jim McGee, an investigative
reporter who had recently joined the paper from the Miami Herald .
McGee worked slowly and methodically, collecting documents from
the Federal Reserve and interviewing Clifford, Altman, and other
sources at length. At a certain point, he learned that the Price Water-
house audits had revealed that BCCI had lent more than $500 million
to First American’s stockholders and that the borrowers had used First
American stock as collateral. When Altman was asked to comment, he
responded in classic BCCI fashion by invoking “confidentiality.” In a
September 27, 1990, letter to the Post , he stated: “We are not kept
informed by our shareholders of their personal financial dealings, and
obviously could not, in any event, make any comments to the press
about their private financial dealings.”

The biggest threat to Clifford and Altman was not the press but the
Morgenthau probe. Prosecutors have an array of tools not available to
journalists, including the power to issue subpoenas and the ability to
offer immunity to informants. Through the deft use of such tools, John
Moscow was able to piece together a large part of the hidden history of
BCCI.

Moscow and his colleagues interviewed dozens of people in the
United States and abroad who had been associated with BCCI. When
Bert Lance visited Long Island’s Hofstra University for a conference on
Jimmy Carter’s presidency, investigators from the D.A.’s office showed
up and served him with a subpoena to testify about BCCI. Some of the
most valuable information came from former officials of the bank,
including Amer Lodhi, one of Jack Blum’s informants, and Abdur
Sakhia, who had headed BCCI’s Miami office and then became the
bank’s top official in the United States. One man with special insight
into BCCI’s misconduct was Masihur Rahman, the former chief fi¬
nancial officer.

The Enforcers ( 299

Rahman, a soft-spoken accountant from East Pakistan (now Bang¬
ladesh), had worked with Abedi at United Bank and was one of his
first recruits at BCCI. He has always maintained that he knew nothing
about the frauds at the heart of the bank until he began investigating in
1989. Speaking about what he found, he later said, “These were items
which horrified me and I wanted to resign forthwith, as soon as I
finished my report.” He quit the bank at the beginning of August 1990
and soon began cooperating with officials in Morgenthau’s office and
other law enforcement authorities.

One thing many of Moscow’s sources agreed on was that it was
common knowledge within BCCI that First American was part of the
“group.” If that was the case, how was it possible that BCCI’s Wash¬
ington lawyers were in the dark? Inevitably, Clifford and Altman
would become targets of Moscow’s probe, and they knew it.

In the summer of 1990, Moscow telephoned Altman to ask him
about BCCI and First American. Altman had for months been telling
reporters and regulators that his conscience was clear — and he would
reiterate that months later when queried by congressional commit¬
tees. But when the New York prosecutor called, Altman’s reactions
did not quite jibe with his public posture. Rather than simply answer
Moscow’s questions, Altman turned the matter over to his attorney,
Robert B. Fiske, Jr., a top litigator with the blue-blood New York
firm of Davis Polk & Wardwell. Fiske soon appeared in Moscow’s
office and said, “If you want to meet with my client, you will have
to give him immunity.” Pouncing on this virtual admission of guilt,
Moscow took on a puzzled air and replied, “You have to tell me what
1 am giving him immunity for. What has he done that is wrong? What
crime has he committed?” (Fiske has denied that he asked for im¬
munity.)

In spite of the progress he was making, Moscow still didn’t have the
documentary evidence he needed, the Price Waterhouse audits. Yet,
from the evidence given by former BCCI officers, he knew of phony
loans, phony capital, the widespread use of nominees, and other al¬
leged crimes. When he asked Price Waterhouse’s New York office for a
copy of the audits, it refused, explaining that its U.S. and British
partnerships were separate and distinct: the Americans said they did
not have the power to obtain audit papers from their British col¬
leagues. This was oddly reminiscent of BCCI’s behavior — using legal
entities in different countries.

FALSE PROFITS

3 00 )

The Bank of England not only refused to give the auditors’ reports
to Moscow, it tried to prevent Price Waterhouse from cooperating.
The British central bank would later maintain that Moscow had made
his approach in the wrong way, contacting middle-level regulators
rather than going to the top. “They didn’t give much indication of
what they were doing, and basically said, 'Hand over your papers,’ ”
recalls a British regulator.

Moscow did manage to obtain a portion of one of the earliest Price
Waterhouse reports from a confidential source. Eventually, the Bank of
England came around after Morgenthau worked his charm on Eddie
George, the deputy governor. The Manhattan D.A. reminisced about
the time he had spent in England during World War II and chatted with
George about mutual acquaintances. There was also some not-too-
subtle pressure. Michael Cherkasky, a senior prosecutor who helped
coordinate the investigation, later said, “Morgenthau told George,
‘We are going to charge this bank. And when we charge them, you are
going to be looked at publicly. We would like to be able to say that the
Bank of England helped us.’ ”

In late 1990, the Fed finally began to take serious action on the First
American issue. The past two years had witnessed the C-Chase indict¬
ment of BCCI, the allegations from the IRS about the BCCI-First
American relationship, exposes in the press, and Morgenthau’s relent¬
less investigation. In addition, the Washington Post's Jim McGee was
preparing a follow-up to the Regardie's story, with additional evidence
of close ties between BCCI and First American. If the Fed lagged
behind the press once again, it would be a serious embarrassment.

In December, the Fed’s William Ryback visited London, where he
met with BCCI’s CEO, Zafar Iqbal, and was allowed by the Bank of
England to inspect the Price Waterhouse reports. Upon his return, he
talked with Tom McQueeney, a senior bank regulator with the Federal
Reserve Bank of New York. On December 18, McQueeney sent a
memo to his boss, Robert O’Sullivan, summarizing the conversation.
Ryback, wrote McQueeney, was “very impressed with Iqbal,” who
had offered to open BCCI’s books to U.S. regulators and “is anxious to
get these matters settled.” But Ryback — whose credulity seemed to
know few bounds — was finally convinced that action was necessary.
He felt that BCCI “has been lying to us for years,” McQueeney wrote,
and “would like to have Clark Clifford and Robert Altman investi¬
gated for their role in withholding that vital information from us.”
Ryback certainly wasn’t going out of his way to help Morgenthau’s

The Enforcers ( 301

investigation, however. “Bill hasn’t committed anything to writing on
this,” McQueeney wrote, “lest Mr. Moscow of the New York District
Attorney’s office subpoena such records.”

But the Manhattan D.A.’s office was ahead of the Fed. In late 1990,
Morgenthau informed Ernest Patrikis, general counsel of the New
York Fed, that there was as much as $854 million in BCCI loans to
First American shareholders, all of them backed by pledged stock.

On January 4, 1991, the Federal Reserve finally ordered an inves¬
tigation into BCCI’s control of First American. Later that month,
the Fed made criminal referrals to the Justice Department about possi¬
ble misrepresentations concerning the relationship between the two
institutions. By acting when it did, the Fed managed to avoid being
scooped by the press once again. On February 3, McGee published a
lengthy article in the Washington Post. It confirmed the May 1990
Regardie's story and added new information about ties between BCCI
and First American. It said, for example, that BCCI officials had been
involved in the hiring of First American executives and that there had
been joint marketing of BCCI and First American services.

Clifford and Altman continued to deny that First American was con¬
trolled by BCCI. “There has been no participation, directly or indi¬
rectly, by BCCI,” said Clifford. Its only role, he said, was “a limited,
arms-length relationship” that conformed with the assurances he had
made to the Federal Reserve back in 1981. But Clifford’s word didn’t
have the ring of authority it once did. Regulators and investigators
now pressed on regardless of these pious assurances from the eighty-
four-year-old Washington icon. On March 4, the Fed issued an order
stating that BCCI had illegally acquired about 60 percent of First
American, and it ordered BCCI to submit a written plan within sixty
days for the divestiture of this stock. BCCI was also ordered to cease
all banking operations in the United States.

Confronted with these orders, Clifford and Altman were forced to
acknowledge the illegal ownership, but they insisted that they had
been in the dark all along. “If the Federal Reserve had been deceived,”
said Clifford, “so had I.”

The credibility of Clifford and his protege took a serious beating in
May, when the Washington Post revealed that they had made millions
of dollars in quick profits on transactions in First American stock.
They had bought the stock in 1986 and 1987 with a total of $18
million in loans from BCCI. In 1988, they sold 60 percent of their

FALSE PROFITS

302 )

holdings. After deducting interest and expenses, Clifford made $6.5
million; Altman walked away with $3.3 million. BCCI had put the
whole deal together, finding the stock for the two lawyers and then
providing a buyer at the right price, the Lebanese merchant Mo¬
hammed Hammoud. Investigators believe that Hammoud was simply
a straw man for BCCI in this transaction — that he borrowed the
money to pay for the stock and then put up the shares as collateral.
Masihur Rahman has described Hammoud as “one of our most flexi¬
ble fronts.”

The stock deal was unusual for several reasons. For one thing, it
was arranged by BCCI in such a way that there was virtually no
risk to Clifford and Altman. BCCI provided 100 percent financing,
and the loans were secured entirely by the stock. Thus, if the stock
went up in price, they could sell it, repay the loans, and pocket the
difference. If the price of the stock dropped, they could simply walk
away from the loans. The interest rate was also suspicious. BCCI lent
the money at LIBOR (the London Interbank Offered Rate) — the rate
of interest that banks in the Eurodollar market pay on deposits , not the
rate they charge borrowers. The whole transaction smacked of a
scheme by BCCI to pour money into the pockets of Clifford and
Altman.

Moreover, Clifford and Altman had failed to disclose these loans to
the Federal Reserve. In December 1989, Ryback had asked Altman
whether any of First American’s stockholders had financed their in¬
vestments with loans from BCCI. When Altman replied, he said noth¬
ing about the loans that he and Clifford had received. When con¬
fronted with this discrepancy, Altman claimed that Ryback later told
him the Fed was interested only in loans to the original investors and in
loans still outstanding to current investors. Ryback has said that he
doesn’t recall altering his original request/ 5.

*Once again, the Clifford-Altman public relations machine swung into action to try to
salvage something from these stunning revelations. Frank Mankiewicz distributed a six-
page memorandum claiming that “this wasn’t a secretive ownership,” that “the compen¬
sation of Mr. Clifford and Mr. Altman is modest” compared with the earnings of executives
of other big banks, and that the directors and shareholders of First American had encour¬
aged them to buy stock. The ownership also was reported to the regulators, Mankiewicz
wrote. On May to , 1991, the Washington Post published a letter from Clifford and Altman
disputing points in articles about their shareholdings. They maintained, for instance, that
“First American was not prohibited from having financial dealings with BCCI.” That was
true, but the two men had certainly given their assurance that BCCI wouldn’t play a role
in financing shareholders in First American, though Altman would maintain that that
assurance related only to the time of the actual takeover in 1982.

The Enforcers ( 303

While Clifford and Altman were fighting a rear-guard action in
Washington, bank regulators in Europe were beginning to close in
on BCCI.

After BCCI was bailed out by Sheikh Zayed in the spring of 1990, the
bank’s top managers tried to portray it as a new, reformed institution,
and the regulators tended to go along with the charade. After all,
wasn’t it true that the bank was now run by a new man, Zafar Iqbal,
rather than the discredited Swaleh Naqvi? Conveniently ignored was
that Iqbal and his minions were as much a part of the old guard as
Naqvi and his technocrats: the “new” BCCI was being run by veterans
of the old BCCI. Incredibly, Abedi and Naqvi — the masterminds of
BCCI’s frauds — remained on BCCI’s payroll until October 1990,
with Naqvi serving as a “consultant” to the bank.

Iqbal, in fact, was himself suspected of wrongdoing. Price Water-
house suspected him of withholding vital information about BCCI. As
far back as April 1990 — and perhaps much earlier — Iqbal knew
much, if not all, about the frauds at the core of BCCI, but he withheld
this information from the auditors and regulators for months. There
were other ominous signs. For example, BCCI refused to issue a fi¬
nancial statement covering the first half of 1990, provoking a clash
with its regulators.

The move to Abu Dhabi made it easier for BCCI officials to conceal
what they were doing. Documents containing evidence of fraud were
systematically destroyed. Other records were packed in boxes and
moved to Abu Dhabi — putting the evidence out of reach of UK bank
regulators and law enforcement authorities. The man responsible for
moving many of the incriminating documents was none other than
Swaleh Naqvi, and he did so with the acquiescence of Sheikh Zayed.

Naqvi must have known that in London, at least, the game was up.
Some of the bank’s top lieutenants had quit, enabling investigators and
journalists to learn more about BCCI’s illegal ways. He and other top
managers escaped just in time. Price Waterhouse has said that within
days of Naqvi’s departure, it came across the so-called Naqvi files, a
secret set of accounts that revealed that he and his special duties
department had manipulated the bank’s accounts for years.

Price Waterhouse summarized the material in a thirty-page report
that it presented on October 3, 1990, to BCCI’s directors and the Bank
of England. The report estimated that as much as $1.5 billion of new

FALSE PROFITS

304 )

capital was required to cover potential losses on the accounts of some
of BCCI’s major customers, including Ghaith Pharaon and Kamal
Adham.

Here, at last, was the definitive and damning evidence that proved
BCCI’s top managers had been involved in fraudulent dealings for
years. The complex and tangled Naqvi files eventually revealed that he
and his special duties team had created fictitious companies; manufac¬
tured loans — sometimes with the knowledge and acquiescence of the
supposed borrowers, sometimes not; and had lent huge sums to
BCCI’s own shareholders, many of whom were just nominees.

There is considerable controversy surrounding these files and what
access Price Waterhouse had to them before 1990. Some BCCI officers
have said that the files weren’t squirreled away in a secret office — as
the auditors have asserted — but were kept in easily accessible cabinets
at Leadenhall Street and in nearby Cunard House. In addition, Price
Waterhouse, as the auditor for ICIC Overseas Ltd., certainly had the
opportunity to find signs of the strange routing of funds and other
shenanigans carried out by Naqvi and his associates.

Once it received Price Waterhouse’s report, the Bank of England
immediately insisted that both Naqvi and Abedi be removed from
BCCI’s payroll. The two men officially resigned the next day, October
4. Zafar Iqbal’s title was changed from acting chief executive to chief
executive.

In London, Price Waterhouse was finally handed the smoking gun
behind the Naqvi files. In January 1991, about fourteen weeks after
the auditors say they first found the files, Iqbal tipped off the auditors
about $600 million of unrecorded deposits. This was firm evidence
that the bank was involved in stealing: accepting deposits and not
recording them in its books. It also indicated strongly to the account¬
ants and regulators that the bank itself was a Ponzi scheme, misappro¬
priating deposits to pay interest and expenses.

Amazingly, BCCI tottered on. For years, the bank had papered over
its outlandish practices by wooing influential friends, by masking the
true state of its finances, and by bringing in fresh cash from depositors
around the world. To BCCI insiders, there appeared to be no reason
why the bank couldn’t remain in business even after these new disclo¬
sures.

The man in charge of the efforts to keep BCCI afloat was Ghanem
Faris al-Mazrui, the head of Sheikh Zayed’s Department of Personal
Affairs since the early 1980s. Mazrui had served on BCCI’s board of

The Eft forcers ( 305

directors since 1981, representing Zayed and his eldest son, Crown
Prince Khalifa. Mazrui and his team spent months working on a
scheme to restructure the bank with advice from management consult¬
ants at Booz Allen & Hamilton. They began discussing — with the
Bank of England and the Luxembourg supervisors — plans to split
BCCI into three separately capitalized parts, based in London, Abu
Dhabi, and Hong Kong, the so-called Oasis banks.

The management consultants began hiring staff to run the new
organization. A former senior executive from Lloyds Bank Interna¬
tional, Leonard Kingshott, was to head the Oasis banks, which were
all expected to be fully operational by the end of 1991. Trying to
maintain its composure, BCCI’s board met in Luxembourg in early
April, formally ratified Iqbal’s appointment as chief executive, and
approved BCCI’s 1990 accounts.

In late May, Sheikh Zayed’s government, as part of the restructur¬
ing, gave a comfort letter to the bank, saying he would pay up to $600
million to guarantee the unrecorded deposits at the bank. In addition,
Abu Dhabi agreed with bank regulators — under the so-called fi¬
nancial support arrangements signed on May 22, 1991 — that it
would take on $4 billion of shaky loans as part of the restructuring.
The loans were transferred to new companies owned directly by Abu
Dhabi, and in return, BCCI received $3.1 billion of promissory notes
and guarantees of $750 million from Zayed’s government. Mazrui
also struggled to get BCCI’s 1990 accounts approved by the bank’s
most important regulators: the Bank of England and the Institut Mon-
etaire Luxembourgeois.

The strain took a toll on Mazrui. He became increasingly with¬
drawn and religious, retreating to the desert to pray and frequently
breaking from work to go to prayers. He wore a long beard of the kind
favored by devout Muslims. But he was optimistic that the ordeal
would soon be over. The regulators’ attitude seemed favorable.

At first, the regulators were inclined to go along with Mazrui’s
restructuring scheme, but the alarming new information they were
receiving from the auditors created grave doubts about the viability of
BCCI. On March 4, 1991, the Bank of England’s head of banking
supervision, Roger Barnes, wrote to Christopher Cowan, a partner in
Price Waterhouse, requesting an intensive new study of BCCI. The
investigation, to be carried out under Section 41 of Britain’s 1987
Banking Act, would seek to ascertain if BCCI’s accounting transac¬
tions had been false or deceitful.

FALSE PROFITS

30 6 )

The probe would, as with the previous audits, be shrouded in se¬
crecy. But this time it would be kept secret even from top officials of
BCCI. Price Waterhouse took the precaution of using code words:
BCCFs holding company in Luxembourg was Sandstorm; Zafar Iqbal
was Blackbird; Feisal Islamic Bank, an institution in Cairo from which
BCCI had purloined deposits, was Tumbleweed. The names, appar¬
ently selected by a British lawyer from the firm of Allen & Overy, also
leaned heavily on gardening terms: Fork was the name for ICIC Over¬
seas Ltd.

The secret investigation revealed a catalogue of fraud, raising
doubts about whether it would ever be possible to restructure the
bank. In a letter dated June 22 summarizing its findings, Price Water-
house said that accounting records had “been falsified ... for a sub¬
stantial number of years.” The complicated manipulations involved
the use of nominee and hold-harmless agreements with “a substantial
number of prominent Middle Eastern individuals” and “the fraudu¬
lent use of funds placed under management by the ruler of Abu Dhabi
and his family.” In addition, Naqvi and his team had created “a
significant number of companies” and operated accounts outside
BCCI “to disguise the nature of transactions and route funds.” BCCI’s
manipulators had also engineered “the creation of a further seventy or
so companies to assist in the financing of the Gulf Group” operated by
the Gokals. There were also “agreements and unrecorded borrowings
through third party banks,” such as Saudi Arabia’s National Commer¬
cial Bank, and investment institutions, such as the Abu Dhabi Invest¬
ment Authority. Price Waterhouse concluded that the falsification of
the accounting records was so widespread that it might never be
possible to reconstruct the financial history of BCCI.

Eddie George, the deputy governor of the Bank of England, took the
report home with him on June 27. It gave him a restless night, for it
showed that BCCI was riddled with fraud and that many of the people
involved in the restructuring were suspected of wrongdoing. It seemed
likely that some of these same people would be involved in running the
“new” banks that would be established in the restructuring.

There was another major concern at the Bank of Fmgland: the
Morgenthau investigation. The Bank of England had been cooperating
with the Manhattan district attorney in recent months, so it had a
fairly clear idea that a New York grand jury might indict BCCI. In the
view of the British regulators, massive legal action against an already
crippled bank would produce chaos, making it impossible to wind the

The Enforcers ( 307

bank down in an orderly fashion. The indictment of a functioning
international bank could also cause upheavals in international finan¬
cial markets. “It was clear,” George later said, “that in light of the new
information, the restructuring couldn’t go ahead.” BCCI would have
to be seized.

Before that could happen, other regulatory authorities would have
to be convinced. The day after reading the report, George called an
emergency meeting of the College of Supervisors for July 2. It would be
chaired by Brian Quinn, the Bank of England director charged with
overseeing banking regulation. Abu Dhabi was deliberately excluded
because the regulators did not want the sheikhdom to pull its own
deposits from BCCI, damaging it further. The Federal Reserve, which
did not usually attend, was invited to send representatives. This was
because E. Gerald Corrigan, the president of the Federal Reserve Bank
of New York, was concerned that the demise of a bank as large as
BCCI could disrupt the dollar markets. The meeting was attended by
William Taylor, the head of banking supervision at the Fed in Washing¬
ton, and Ernest Patrikis, general counsel to the New York Fed.

Although Eddie George was firmly convinced that BCCI had to be
shut down, some of the other regulators balked. Some suggested ap¬
pealing to Abu Dhabi to wind down the bank. Resistance began to
melt, however, when George’s fellow regulators absorbed the contents
of the Section 41 report. They began to see that BCCI was beyond
salvation: it was riddled with fraud. By the end of the day, the regula¬
tors agreed on the need for swift and decisive action.

The next problem was timing. The European regulators wanted the
seizure to occur on Friday, July 5, but the New York Fed objected
because of its concern about the dollar markets. U.S. markets would be
closed the day before for the Independence Day holiday, and trading
would be thin on Friday because many people would give themselves a
long weekend. To allay the Americans’ concerns, the Europeans agreed
to shut down BCCI late Friday — after the close of the West Coast
markets. The eight-hour time difference between California and Lon¬
don would mean that BCCI would be closed early Saturday morning in
Europe.

Sheikh Zayed’s representative, Mazrui, would be informed on Fri¬
day morning in Luxembourg, at a meeting with the Luxembourg
regulator Pierre Jaans and Brian Quinn of the Bank of England. Maz¬
rui thought the purpose of the meeting was to discuss the restructuring
of BCCI.

FALSE PROFITS

308 )

When Quinn arrived in Luxembourg on Thursday, he discovered
that there was a problem with the timing of the closure. Luxembourg
regulators told him that a local court order essential to the shutdown
could be obtained only during business hours, meaning it would have
to happen during the day on Friday. So, in a series of hasty transatlan¬
tic telephone calls, the regulators agreed that the seizure of the bank
would occur at 1:00 p . m . London time — just before the New York
financial markets opened.

On Thursday evening, the mood in Washington was festive, and
there was a spectacular fireworks display to celebrate the holiday. The
Federal Reserve held its annual party where employees could watch
the show. William Taylor attended with his family. But they left early
that evening: Taylor had to be at his desk before dawn to prepare for
the shutdown of an international bank.

On Friday morning in Luxembourg, Ghanem Faris al-Mazrui headed
to the Institut Monetaire Luxembourgeois (IML) to meet with Pierre
Jaans and Brian Quinn. He must have felt relieved. It had taken him
months to get BCCI’s messy accounts for 1990 past the auditors.
Finally, long after other banks had published their results for that year,
Mazrui thought he could get the accounts approved by Jaans and
Quinn. Later that day, BCCI’s board of directors would approve the
restructuring scheme. This, in turn, would mean that it could go
ahead; some order would be restored. There would be relative peace
and quiet and an end to Mazrui’s constant shuttling between Abu
Dhabi and London. Most important, Sheikh Zayed’s name would be
out of the newspapers, and the ruler wouldn’t have to add much to the
monies he had recently put into the bank.

Mazrui was carrying three binders detailing the latest draft restruc¬
turing plan, which would turn BCCI into Oasis Bank of Europe and
Canada, Oasis Bank of the Middle East and Asia, and Oasis Bank of
the Far East. Copies had been sent to the Bank of England and the IML
on July 3, just two days before.

At 10:00 a . m ., Mazrui stepped from his limousine and hurried into
the concrete office block housing the IML. Wearing traditional Arab
dress — white robes and kuffiya headdress — he was received by
Jaans, the graying IML chairman. He walked into Jaans’s office and
exchanged pleasantries with him and Brian Quinn.

To Mazrui’s dismay, the two regulators expressed skepticism about
whether the restructuring plan was feasible. They also criticized

The Enforcers ( 309

BCCI’s audited accounts. Suddenly, they began explaining that they
and the group of regulators they represented had decided three days
earlier to close BCCI. Jaans and Quinn told a stunned Mazrui that they
had decided that they couldn’t approve the 1990 accounts. BCCI, they
stressed, had no capital after recognition of its real losses. It was
therefore insolvent and would have to be wound up. The news was
devastating to Mazrui, and he would be held responsible back in Abu
Dhabi. He had assured Zayed and his circle that the restructuring was
on track.

In anguished tones, Mazrui asked Quinn and Jaans why they had
decided to do this.

Because of the fraud at the heart of the bank, Quinn replied.

Mazrui was still puzzled. And his reply betrayed a chilling candor
about what sort of bank BCCI really was. “But we’ve known about
that for a long time,” the Arab official said. “We thought you did too.”

If Quinn and Jaans were taken aback, they didn’t let on. Instead,
they talked about the new information contained in the Price Water-
house report submitted to them in the past two weeks. There was no
alternative, they said.

By keeping Mazrui in the dark until the seizure was about to hap¬
pen, the regulators had, of course, hoped to prevent Abu Dhabi from
pulling deposits out of BCCI and thus harming other depositors. But
Mazrui boldly maneuvered to minimize the prospective losses to Za¬
yed. According to one account, he told the two regulators he had to
telephone Abu Dhabi immediately to convey the regulators’ decision.
From a nearby office, he hastily called the sheikh’s office in Abu Dhabi
and told an associate to stop a planned transfer of $650 million from
the National Bank of Abu Dhabi to London that was to have helped
recapitalize BCCI. This money was to have been a central component
in the restructuring."*

After the meeting, Jaans had to deal with some of the practical
problems involved in closing down a global bank. For the seizure to be
legal, a Luxembourg judge would have to sign an order to liquidate
BCCI’s Luxembourg holding company. After trying to catch up with
telephone calls from his counterparts in London, Paris, and Madrid,

^Surprisingly, the regulators didn’t seem to mind Mazrui’s move. “Once the bank was
closed, you would expect the government of Abu Dhabi to stop the transfer,” a British
regulator said. In any case, he added, when you’re closing a multibillion-dollar institution,
you can’t worry about individual transfers.

FALSE PROFITS

3 10 )

Jaans rushed over to the courthouse to get the order. When he did, no
judge could be found.

It was lunchtime and, by coincidence, July 5 was the day for the
judges’ picnic, so all of them had gone to a pleasant orchard outside
town. Jaans was crestfallen. This was the most important day of the
year for him — perhaps of his whole career — and things were already
going wrong.

After a high-speed chase around town, a judge was finally found and
brought back to the court. Jaans got the order for the liquidation,
which was premised on the insolvency shown in BCCPs 1990 ac¬
counts. The court later disclosed that BCCI lost more than its entire
capital and reserves in 1990. This alone gave the regulators legal
justification for closing down the bank.

With the court order in hand, Jaans telephoned Quinn, who had
remained at the IML, portable telephone in hand. They could proceed.
Quinn immediately called London and the international swoop on
BCCPs offices began.

The Shutdown

The shutdown came with stunning, brutal swiftness. At 1:00
p.m. on Friday, July 5, 1991, bailiffs marched into each of BCCI’s
twenty-five offices in Britain. It was lunchtime, and most of the bank’s
clerks had left for a sandwich. Using their full legal authority, the
bailiffs told the remaining employees to gather their personal effects
and leave the premises. Moments later, notices were posted on the
glass doors of every BCCI branch telling customers that the bank had
been closed by order of the Bank of England.

There were similar scenes in France, Luxembourg, Spain, and Swit¬
zerland. In the Cayman Islands, where some of the most spectacular
frauds had been committed, the governor of the British colony ap¬
pointed a receiver for three BCCI units: its Caymans holding company,
ICIC, and Credit and Finance Corporation. The governor also froze
the assets of as many as eight companies believed to be linked to BCCI,
most of which were in the ICIC group.

The Bank of England and other regulators contacted the banking
authorities in as many as sixty other countries where BCCI operated,
asking for their cooperation in closing the institution. Most regulators
complied quickly. In some countries, BCCI accepted the inevitable and
quietly closed on its own. On Saturday, July 6, BCCI’s manager in
Tokyo told the Japanese finance ministry that he would be shutting the
office “temporarily.” The governor of the Bank of Japan, Yasushi
Mieno, announced soon afterward that his investigators had started
looking into BCCI’s branch, which held $391 million in deposits at the
end of the first quarter of 1991. On July 22, a Tokyo court would order
the winding up of the branch, the first liquidation of a foreign bank
branch since World War II.

FALSE PROFITS

3« )

Seizing a bank is tricky at the best of times. If some depositors find
out before the closure, they will rush to pull out their money. Unless
there is a system of deposit insurance, all the other depositors will
suffer unfairly, since there will be less cash to go around. The closure of
a bank can disrupt the system of payments between banks. All of a
sudden, a bank that is a party to many different transactions is re¬
moved, leaving gaps in thousands of payments.

At the New York Fed, dealers carefully monitored the dollar mar¬
kets, mindful that their boss, E. Gerald Corrigan, was concerned about
the potential harm the closure might cause to the New York money
markets. BCCI’s balance sheet was denominated in U.S. dollars, and its
largest holdings were short-term dollar investments. As it happened,
there was little noticeable effect because of the massive size of the
markets and because few financial firms traded with BCCI.

The shutdown of BCCI touched off angry protests by depositors
from Britain to Hong Kong, sometimes erupting into violence. The
timing of the swoop — at midday on Friday — meant that the first big
demonstrations in London didn’t take place until Monday, when de¬
positors and employees demonstrated outside BCCI’s headquarters
and the Bank of England. Protesters carrying picket signs chanted,
“Give us back our money.”

In Hong Kong, where BCCI had a large branch network, customers
took to the streets on July 8 and 9 when the colony’s financial secre¬
tary, Sir Piers Jacobs, said the government would liquidate BCCI. This
would mean big losses for the bank’s forty thousand depositors.
Wielding batons, officers of the Royal Hong Kong Police battled dem¬
onstrators, who burned an effigy of the Hong Kong banking commis¬
sioner, David Carse. Rumors quickly spread that other institutions
were in trouble, causing runs on two foreign banks.

What particularly infuriated the depositors in Hong Kong was that
Carse had initially said in a widely distributed press statement that
“the operations of BCC (Hong Kong) remain sound and viable.” The
offices opened for business as usual on Saturday, but Carse was forced
to close them two days later, after he learned that Abu Dhabi wouldn’t
support the bank as he had hoped.

Some of the most pathetic scenes occurred in Bangladesh, a desper¬
ately poor country where BCCI’s four branches had collected money
from some forty thousand customers. Crowds thronged the commer¬
cial district of the capital, Dhaka, in the days after the seizure. One
demonstrator was so distraught that he even talked of dousing himself

The Shutdown ( 313

with gasoline and setting himself on fire. Another shouted that the
closing of the bank was “a conspiracy against poor countries.”

The nineteen-year masquerade had ended. The bank could not make
new loans or accept deposits. Most important, BCCPs criminal ram¬
page was over.

The victims of that rampage included nearly one million depositors
who had entrusted BCCI with more than $10 billion."' In Britain,
about 120,000 residents had deposited £250 million ($400 million) at
the bank. No one knew how much of that money would be recovered.
Britain, unlike the United States, does not have a generous deposit
insurance program backed by the government. The British depositors
could only count on getting back 75 percent of the first £20,000 they
held with the seized bank, even if the money was held in different
accounts.

For the hundreds of small Asian businesses in Britain that relied on
BCCI for credit and other banking services, the seizure was cata¬
strophic. Many of them had been drawn to the upstart bank in the
belief that it was run by Third World financiers who would be sensitive
to their special needs. Now, they found out, their funds were frozen,
and much of the money was likely lost. “We are the ones getting hurt,”
lamented Mohammed Choudary, whose textile business in the York¬
shire town of Bradford was brought to a halt when it lost all its trade
financing, which had been provided by BCCI. “It does not seem fair.”
His factory, which had employed sixty people making bed linen, was
reduced to only one seamstress because it lost access to bank credit.

The victims also included BCCI’s employees. Most of them were not
involved in any wrongdoing, yet they suffered in several different
ways. Thousands had been laid off before the shutdown; those who
remained would now lose their jobs. They would later learn that the
pensions they had counted on would never come: Abedi had raided the
staff benefit fund in the mid-1980s to cover trading losses. Many
employees were also depositors. One of them, who had left the bank in
January 1991 after more than ten years, had more than £200,000 on
deposit. He stood to collect only £15,000 from deposit insurance, and
that would likely take several months. “I’m buried,” he confided on
the day of the seizure.

*BCCI’s deposits had plummeted from more than $20 billion after the controversies of
the previous few years.

FALSE PROFITS

3M )

More surprising, about thirty of Britain’s local authorities (munici¬
palities) were big depositors, with £81 million in BCCI. Many of them
had taken to borrowing money in the market and then depositing the
funds at BCCI at a higher interest rate. The hardest hit was the Western
Isles Council — the local authority on Skye, a remote island off the
northwestern coast of Scotland — which had £23 million on deposit.
Why were the thrifty people of Skye — many of them from the clan
Macleod — investing their money with BCCI? “Over the years that
this authority has used BCCI,” a local official would later explain to
government investigators, “it has consistently paid a higher rate of
interest.” The reason BCCI paid a higher rate, of course, was that the
market viewed it as a risky bank, but this was apparently ignored.

In time it emerged that Donald Macleod, the Western Isles’ director
of finance, and his colleagues had borrowed as much as £16.5 million
of the money they had on deposit at BCCI. The borrowings had been
made from a life assurance company, a state-owned company, and
from another nearby local authority. Scotland’s controller of audit
would later issue a report that severely criticized Macleod, saying he
had gone beyond his authority by borrowing so heavily. He was sus¬
pended from his job after the seizure of BCCI. In December 1991, a
committee of inquiry in the Western Isles recommended the immediate
dismissal of both Donald Macleod and George Macleod, the chief
executive of the local authority.

Other local government depositors included the town of Bury, with
£6 million; Harlow, with £4 million; Rochester on Medway, with £4
million; and Westminster, with £3.58 million. Again, many of these
authorities had borrowed money to deposit in BCCI and take advan¬
tage of its higher interest rate.

The British deposit brokerage firm of R. P. Martin Bierbaum was
one of five or six such companies that were giving out the name of
BCCI as a potential deposit taker immediately before the seizure. A
government report estimated that R. P. Martin was connected with
£42 million of the total of £81 million deposited by local authorities.
An R. P. Martin spokesman told a government inquiry that it did not
provide investment advice and that “the proposition that local author¬
ities rely on brokers for creditworthiness assessments is absurd.”

A cross-party committee of British members of Parliament, the so-
called Treasury Select Committee, would in December 1991 criticize
the Bank of England and call for stricter rules governing the conduct of
money brokers and the advice they were obliged to give local authority

The Shutdown

( 3i5

customers. The report also said that local authorities shouldn’t borrow
money merely to lend it to banks, as many had been doing in the case
ofBCCI.

The week after the closure, depositors began to form action groups,
hoping to secure some compensation for their deposits. In Britain, a
group of members of Parliament from the main parties tried to help
these victims. Some depositors tried to find relief in the courts. In
Manchester, the law firm of Alexander Tatham organized a pressure
group, and there was talk of a series of lawsuits against BCCI’s top
officers, the bank’s auditors, and others. Few of the suits materialized;
a major hurdle was that in Britain, accountants don’t have third-party
liability (as they do in the United States). This means that accountants
are responsible to their clients but not to anyone else who relies on the
financial statements they have prepared.

In the United States, depositors brought actions against BCCI and
other defendants blamed for the collapse. The first suit was filed in
August in San Francisco by a customer named Shrichand Chawla;
similar actions followed in San Diego and Los Angeles. These claims
were soon consolidated into one suit by the class action lawyers
Milberg Weiss Bershad Specthrie & Lerach of San Diego. The suit
named dozens of individual and corporate defendants, including Price
Waterhouse, Sheikh Zayed, Ghaith Pharaon, Clark Clifford, Robert
Altman, First American board members, Bank of America, and even
Hill and Knowlton, the public relations firm. The judge tried to throw
the case out, but Milberg Weiss countered by petitioning for a new
judge, claiming that the ruling judge was biased. As of the fall of 1992,
the case was still in limbo.

The effects of the collapse were most severe in the developing coun¬
tries where BCCI had a large presence. In Cameroon, as in many
sub-Saharan African countries, the bank was a part of the establish¬
ment, having cozied up to political leaders and members of the busi¬
ness elite for years. BCCI’s seizure paralyzed businesses and denied
critical financing to the few active areas of the economy. Incredibly, the
Cameroon government had deposited more than one third of its for¬
eign exchange reserves in BCCI. Uncle Sam suffered too. The U.S.
Agency for International Development had $10 million in BCCI’s
Cameroon bank.

Depositors in Cameroon were allowed to take out only 10 percent
of their money. Richard Massot, a shipping executive, stood in line at
a BCCI branch to withdraw the meager share of his company’s de-

FALSE PROFITS

316 )

posit. “Our account is blocked, which means we can’t pay people,” he
told a reporter. “Our customers’ money is blocked, which means they
can’t pay us.”

In many developing countries, depositors blamed Western regula¬
tors for the failure of BCCI and spoke warmly of the seized bank, even
though they had lost so much. “BCCI was a Third World dream, and a
lot of people had sentimental feelings for the bank,” said Ghulam
Mohiuddin, a young Bangladeshi who had graduated from MIT. He
had used BCCI’s facilities to pay for the Apple computers he imported
to Bangladesh. Many people would take months to come to terms with
the bank’s manifest and rampant corruption. To this day, some believe
it to be a fabrication of the Western press or financial system. Bankers
in the United States and Europe, they argue, couldn’t tolerate a suc¬
cessful bank managed by Third World people. Some people in Muslim
countries blamed anti-Muslim and Zionist forces.

The sad reality was that a bank owned and run by Muslims from
developing countries had systematically robbed their own people.
Many of the victims were in Egypt, where BCCI had looted Feisal
Islamic Bank, which had collected deposits from devout Muslims be¬
cause it promised to invest their money in conformity with Islamic law,
which forbids the payment of interest. Their religious scruples made it
easier for BCCI to steal their money.

In the heart of the City of London stands an imposing white stone
building, designed by the famous British architect Sir Edwin Lutyens,
that houses the Bank of England. One of the world’s oldest central
banks — founded in 1694 — it is steeped in tradition. The guards in
the entranceway wear powder pink tailcoats and top hats with buck¬
led hatbands. Denizens of the City often refer to this venerable institu¬
tion as “the Bank,” implying that if it is not the only bank around, it is
clearly the most important one. Another familiar nickname — the Old
Lady of Threadneedle Street — derives from a 1797 caricature by
James Gillray, a famous political satirist. It depicts a scoundrel assault¬
ing the Bank of England, which is portrayed as an elderly woman
clothed in a long dress made of pound notes. The drawing refers to the
recent first issue of pound notes, an event not appreciated by much of
the populace, who were more fond of traditional gold and silver coins.

Britain’s central bankers have learned to live with paper money, but
they still strive to project an aura of wisdom, strength, prudence, and
inscrutability. They are, after all, charged with the vital task of ensur-

The Shutdown

( 3 1 7

ing the stability of the country’s financial system and have long played
a leading part in international financial relations. But for years they did
little to protect the public from BCCI.

The regulators were on the defensive the very day of the shutdown.
At 4:00 p.m., Robin Leigh-Pemberton, the governor of the Bank of
England, discussed the seizure at a hastily arranged press conference.
He said that the swoop on BCCI “followed the discovery of large-scale
fraud going back several years.” The culture of the bank was criminal,
he said, adding that this fraud "had been perpetrated at the highest
levels within” BCCI and was “on a worldwide scale.” Reporters were
quick to ask him why the Bank of England had not acted sooner; one
journalist pointed out that Price Waterhouse had qualified the ac¬
counts of ICIC in 1989. Leigh-Pemberton responded that the Bank of
England did not have solid evidence of fraud until 1991.

Authorities in Abu Dhabi insisted that the regulators shouldn’t have
seized the bank at all. On the day of the closure, the government of the
UAE issued a statement criticizing the Bank of England for acting
precipitately, given that a restructuring of the bank had been negoti¬
ated and was in progress. But some days later, when an American
journalist visited the UAE’s central bank governor, Abdel-Malik al-
Hamr, he refused to answer so much as a single question about BCCI.
The local BCCI affiliate, BCC (Emirates), continued to operate nor¬
mally, with Abu Dhabi’s oil wealth and the UAE’s central bank stand¬
ing behind it.

The timing of the shutdown allowed all the parties involved a
breathing space over the weekend. Friday in the Islamic world is the
Muslim holy day, yawn al-jamaa — literally, the day of gathering (at
the mosque). Abu Dhabi is quiet, with most people away from their
offices. Big crowds mill around the more popular mosques after noon
prayers. The three-hour time difference with London also meant that
the shutdown didn’t occur until 4:00 p.m. Abu Dhabi time.

Four days later, Governor al-Hamr of the central bank headed a
delegation of UAE officials that met with Bank of England officials in
London. One member of the group was Ghanem Faris al-Mazrui,
who, as Zayed’s adviser, had spent months on the aborted restructur¬
ing scheme. The Arabs were furious. They wanted to know why
BCCI’s assets had been seized with no warning to Abu Dhabi. Worse,
in their view, the Bank of England had allowed the emirate to put
money into BCCI after the regulators had decided to close the bank.

The Bank of England tried to persuade the visitors that it was the

FALSE PROFITS

3 l8 )

UAE’s responsibility to cover any shortfall in the bank’s books. For
their part, the Abu Dhabi officials continued to criticize the Bank of
England for the closure and held auditors responsible for failing to
discover the bank’s irregularities. On July 15, Robin Leigh-Pemberton
and his director in charge of banking supervision, Brian Quinn, flew to
the UAE for additional meetings. They sought to explain their reasons
for moving against BCCI and also asked Abu Dhabi to help compen¬
sate depositors.

On July 18, the British Parliament erupted at prime minister’s ques¬
tion time, a weekly session at which the leader of the government takes
questions from all comers. Opposition Labour party members pointed
out that former BCCI employees had written to the Treasury, the Bank
of England, and to ministers in June 1990 to report widespread cor¬
ruption and nepotism in the bank. The speaker of the House of Com¬
mons shouted himself almost hoarse calling for order as the parlia¬
mentary session degenerated into near-chaos several times. Labour’s
head, Neil Kinnock, said that Prime Minister John Major had been
“utterly negligent” for failing to act sooner against BCCI. Major pro¬
tested that he had learned of the scale of the fraud only on June 28. “If
you are saying I am a liar, you had better say so bluntly,” he rounded
on Kinnock.

The following day, Sheikh Zayed published a full-page advertise¬
ment in Britain’s major newspapers lambasting the Bank of England
and criticizing Price Waterhouse as well. The same ad ran four days
later in the Wall Street Journal, the New York Times, and the Washing¬
ton Post; it was signed by the government of Abu Dhabi, the Abu
Dhabi Investment Authority, and the Department of Personal Affairs
of Sheikh Zayed.

Partly to try to defuse the issue, on Friday, July 19, Britain’s chancel¬
lor of the exchequer, Norman Lamont, announced an independent
public inquiry into the supervision of BCCI. The surprise statement
severely undercut Leigh-Pemberton, who only a day before had said
that such a formal probe would be inappropriate. On July 22, Prime
Minister Major’s government commissioned Lord Justice Bingham to
head the public inquiry and to determine whether the action taken by
the regulators was “appropriate and timely.” Bingham had enjoyed a
highly successful career as a barrister, and he had a reputation for
intelligence, independence, and disciplined investigation; his 1977 in¬
quiry into the major oil companies didn’t shy away from tagging some
of Britain’s most powerful firms for evading government sanctions

The Shutdown

( 3i9

against trade with Rhodesia. But, typically for Britain, Bingham’s
inquiry would be conducted in secret and wouldn’t have subpoena
powers. If people didn’t want to provide information, they wouldn’t
have to.

It soon became clear that the Manhattan district attorney, Robert
Morgenthau, was driving the investigation of the BCCI affair. His
prosecutors and investigators were familiar with complex business
fraud because of New York’s role as a world financial center and they
had a two-year head start. Morgenthau’s office knew where many
of the bodies were buried, while others were only just beginning to
realize that the burial ground existed. The New York D.A.’s inves¬
tigation forced regulators in both Europe and the United States to
take action against several BCCI allies. A prime target was Ghaith
Pharaon.

Morgenthau’s office had established that Pharaon was essentially a
front man for BCCI when he invested in National Bank of Georgia,
Independence Bank, and CenTrust. BCCI secretly lent him the money
to make these investments, and Pharaon put up the stock as collateral.
He even gave blank, signed stock transfer forms to BCCI, enabling it to
take possession of NBG shares at any time. There was also evidence
that BCCI officials had been involved in managing some of its secret
U.S. subsidiaries. Kemal Shoaib, a senior official at the London head¬
quarters, was allegedly responsible for monitoring NBG and Indepen¬
dence Bank. In 1985, Shoaib had “resigned” from BCCI to become
chairman of Independence.

When Morgenthau’s investigators turned this information over to
the Federal Reserve in the spring of 1991, it moved swiftly. On May
6 — two months before the seizure — the Fed ordered BCCI to sell its
stock in Independence Bank. On July 12, the Fed published an order
seeking to bar four BCCI insiders from U.S. banking for life: Abedi,
Naqvi, Pharaon, and Shoaib.

Just over two weeks later, Morgenthau dropped his own bombshell.

On the morning of Monday, July 29, his office at One Hogan Place in
Lower Manhattan was filled with reporters and cameramen. The night
before, the D.A.’s office had alerted the main television networks that
there would be an important announcement so that camera equipment
could be set up ahead of time. A plastic sheet was thrown over Mor¬
genthau’s desk to conceal his papers from any inquisitive eyes.

The D.A. arrived at eleven o’clock and sat down behind a spray of

FALSE PROFITS

3 20 )

microphones. He was flanked by a protective group of young investi¬
gators buttoned into bulging suit jackets.

Morgenthau and his team were astonished at the size of the gather¬
ing. Even in high-profile cases, it was rare to see more than three or
four television cameras at press conferences. On that day, there were
about twenty-five. The New York Times , the D.A.’s local paper and a
barometer of news interest, hadn’t given much space to this case, so the
investigators were even more shocked by the large and international
crowd that packed the office. In addition to a full turnout by the big
American networks, there were crews from European, Latin Ameri¬
can, and Asian television stations.

The D.A. cleared his throat, winced, and began describing a startling
array of alleged crimes as camera shutters clacked and videocassettes
whirred. “A New York County grand jury,” Morgenthau read from
his text, “has returned a twelve-count indictment that charges that the
Bank of Credit and Commerce International, BCCI, its related entities,
and two of its founders engaged in a multibillion-dollar scheme to
defraud its depositors.” The perpetrators, he continued, had “falsified
bank records to hide illegal money-laundering, and committed larce¬
nies” totaling many millions of dollars, and had “paid off public
officials.” The wily prosecutor looked up from his notes. “This indict¬
ment,” he said, “spells out the largest bank fraud in world financial
history.”

After more than two years of tortuous investigation, Morgenthau
and his team felt they had finally unraveled some of the complex
dealings of Agha Hasan Abedi and Swaleh Naqvi. The indictment
charged BCCI, Abedi, and Naqvi with larceny, money-laundering, and
fraud. From its very inception, said Morgenthau, BCCI had been a
fraud, because it misled depositors about its ownership and financial
condition. Since all of BCCI’s deposits — which at one point totaled
$20 billion — had been collected under false pretenses, the BCCI affair
was a $20 billion fraud. An essential part of the scheme, Morgenthau
went on, was the use of prominent Arab investors as front men. In
exchange for payments from BCCI, they posed as shareholders. The
D.A. called this technique “rent-a-sheikh.” Four alleged front men
were named in the indictment: Pharaon, Adham, Sayed Jawhary, and
Faisal Saud al-Fulaij. All four were listed as stockholders; all but
Pharaon were also on First American’s list of shareholders.

BCCI had achieved its ends partly through bribery, Morgenthau
charged, citing the $3 million in payoffs that the grand jury alleged

The Shutdown

( 3 ZI

BCCI paid to two officials of Peru’s central bank. In exchange, Mor-
genthau said, BCCI received central bank deposits. The D.A.’s office
said it had information showing that Peru’s former president, Alan
Garcia Perez, knew about the bribes."* Toward the end of the press
conference, Morgenthau made it clear that the indictment covered
only a fraction of BCCI’s criminality. It represented, he said, only
about one quarter of the potential case against the bank, its operators,
and its allies.

Later the same day, the Federal Reserve issued a ioo-page order that
fined BCCI $200 million for alleged breaches of U.S. banking laws. It
also sought to ban several alleged front men for life from U.S. banking.
The timing was not coincidental; it had been carefully coordinated
with the D.A.’s office. The order was based primarily on investigative
work performed by Morgenthau’s team and by two lawyers from the
Fed’s enforcement division, Richard Small in Washington and Thomas
Baxter in New York.

In exquisite detail, the Fed’s order spelled out how Abedi and his
associates had used front men to acquire a majority ownership of First
American Bankshares secretly. The alleged front men included Adham,
Jawhary, and Fulaij as well as Abdul-Raouf Khalil.

Adham was BCCI’s most important front man after Pharaon. Both
men, however, would occasionally put in some of their own money
alongside their nominee holdings. The former Saudi intelligence chief
was a nominee shareholder in BCCI, Attock Oil, and First American.
In addition, he was a holder of Capcom’s shares. His reputation for
great wealth had helped to bolster confidence in BCCI. When, in 1981,
Adham sought approval from the Federal Reserve to invest in First
American, he claimed to have a net worth of nearly a quarter of a
billion dollars.

Unlike most of the other sheikhly shareholders in First American,
Adham really seems to have had occasional contact with Clifford
and Altman. The lawyers maintained that he represented other share¬
holders and was a conduit for information. But some believe his more
active role may actually indicate that he was an architect of the scheme

* Around the same time Morgenthau made his accusations against the central bankers,
the Peruvian parliament was investigating allegations that Garcia had enriched himself
through corruption and had deposited millions of dollars in BCCI. Later in the year, Garcia
was charged with embezzlement, but Peru’s supreme court ruled that he was immune from
prosecution. Garcia denied the charges. After President Alberto Fujimori assumed dictato¬
rial powers in April 1992, Garcia fled to Colombia, where he was granted political asylum.

FALSE PROFITS

322 )

to take over First American and perhaps of some of the other frauds at
the bank. Adham was certainly a convenient and willing nominee for
BCCI. Despite assurances to the U.S. regulators that he would invest
his own funds in First American, he had actually bought the stock with
money borrowed from BCCI, and the loans were never serviced. The
Fed says that he was paid at least $2 million for his services as a front
man.

The Saudi spymaster was also suspected of involvement in the loot¬
ing of BCCI, partly because of his links to Capcom, which had played
such a critical role in the fraud. In addition, his ties to the Saudi court
may help to explain why BCCI got so many deposits from Feisal
Islamic Bank. The Saudi ruling family controls Dar al-Mal al-Islami,
the 50 percent owner of that bank.

In 1991, Adham was unwilling to acknowledge any wrongdoing.
Speaking through his Washington lawyer, Plato Cacheris, he insisted
several times that he had always acted properly. In early 1992, he
managed to negotiate himself a safe passage to talk to investigators in
London, where he began to bargain with his pursuers.

Khalil, long an aide to Adham and a top Saudi intelligence official,
was listed as a shareholder in BCCI, First American, and Capcom. The
listings were misleading, since he was mostly a secret nominee. In all
likelihood, he was a nominee in BCCI brought in by Adham. Although
perhaps not at the outset, Khalil became a nominee in First American,
according to Fed investigators. Shares registered in his name were
pledged against the BCCI loans that were used to purchase them. BCCI
paid Khalil $15 million in February 1987 for the use of his name in
investment transactions through the end of 1986 and for the profit on
his shares, according to an agreement signed by him and BCCI.

Jawhary, an adviser to Adham, was listed in 1988 as the owner of
0.75 percent of BCCPs stock, but he was merely a nominee. Jawhary
had also acted as a front man in the takeover of First American,
borrowing from ICIC to pay for the shares, according to the Fed. He
was paid $150,000 a year for acting as a nominee in the holding of
both BCCI and First American shares. Again, the loans from BCCI and
ICIC used to finance his share purchases were never serviced.

Fulaij, the chairman of Kuwait Airways until 1977, was listed as a
shareholder of BCCI, its affiliate Kuwait International Finance Com¬
pany (KIFCO), and two companies secretly controlled by BCCI: At-
tock Oil and First American. A former UAE official expressed surprise
that the Western regulators took Fulaij seriously, remarking that he

The Shutdown

( 3 2 3

and others in Abu Dhabi knew the Kuwaiti didn’t have the money
needed to finance the kind of investments he supposedly made. Fulaij’s
entire shareholding in KIFCO was financed with loans from KIFCO.

Fulaij was also a nominee for BCCI in his shareholdings in First
American. BCCI and ICIC altogether paid him about $100,000 a year
for the use of his name. And in 1990 they gave him an additional
$606,000 for such services.

After years of ignoring increasingly strong warnings about BCCI,
the Fed had finally begun to act. Even now, the central bank’s perfor¬
mance was not quite as impressive as it appeared. The Fed’s orders
generally tracked work that had already been completed by Morgen-
thau’s team, and there was sometimes a curious lack of follow-up. In
early 1992, Khalil’s lawyer, James Linn, said that neither he nor his
client had ever been served with the Fed’s July 29, 1991, order. Only
Morgenthau, Linn judged, was serious about following the case
through.

When a bankrupt financial institution is taken over by regulators, it
has to be liquidated. The liquidator sells off assets and uses the cash to
pay off liabilities, which consist mainly of deposits. In BCCI’s case, a
court in Luxembourg (where the bank’s holding company was incor¬
porated) appointed as liquidator Brian Smouha, a partner in the Lon¬
don office of Touche Ross, one of the world’s biggest accountancy
partnerships. Smouha had performed this role after another spectacu¬
lar bank failure: the 1982 collapse of Italy’s Banco Ambrosiano. He
was the liquidator of Ambrosiano’s Luxembourg holding company.

In Britain, the liquidation didn’t go as smoothly as the Bank of
England had hoped. On July 30, a judge granted a four-month delay in
the winding up of BCCI to allow time to consider a possible rescue
plan by Sheikh Zayed. The concession to Abu Dhabi, which was still
insisting that the bank could be saved, came after Zayed’s government
had pledged to pay £45 million in partial compensation to British
depositors. The Bank of England had pressed the court to favor the
immediate liquidation of the bank. Smouha, on the other hand,
wanted to continue negotiating with Abu Dhabi. In his view, the best
solution for the depositors was a quick and amicable settlement with
Sheikh Zayed.

Similarly, in U.S. Bankruptcy Court in Manhattan, a judge issued an
order in August blocking most U.S. legal action against the bank until
November 1. Smouha’s strategy was to subordinate any U.S. settle-

FALSE PROFITS

3 2 4 )

ment to a worldwide liquidation agreement involving Abu Dhabi,
Luxembourg, and London.

Many depositors hoped that the Bank of England would succeed in
pressuring Sheikh Zayed to compensate all the bank’s depositors fully.
But Abu Dhabi was in no such mood, and it would take months of
secret negotiations between the liquidators and Abu Dhabi officials
before Zayed and his government made any offer to help.

The shutdown of BCCI was a serious blow to several companies and
financial institutions close to the rogue bank. One of the biggest bor¬
rowers in Britain was Control Securities. This conglomerate was
headed by Nazmu Virani, the Asian entrepreneur who had introduced
BCCI officials to British politicians. After the bank was seized, it
became clear that there was much more than an ordinary lender-bor¬
rower relationship. BCCI had channeled huge amounts of money to
Control Securities and even held a large block of its stock. Control
Securities was also a big depositor, and the firm announced in late July
that it had made a £3.8 million provision against potential losses on
those deposits. The business went into a tailspin, and Virani was soon
under investigation by the Serious Fraud Office as part of its probe into
BCCI. The London Stock Exchange suspended trading in the com¬
pany’s shares.

The biggest customer casualty was the Gokal family’s Gulf Group.
BCCI had propped up the Gokals with a huge volume of loans —
many of them fraudulent — since the 1970s. When the bank collapsed,
parts of the Gulf Group went into liquidation.

And then there were the companies and banks that BCCI secretly
owned. The biggest by far was First American Bankshares, and con¬
fidence in the institution was severely shaken by the scandal.

Clark Clifford and Robert Altman had always portrayed First
American as a success story. When, for example, the May 1990 Re -
gardie’s article suggested that its performance was mediocre compared
with that of similar banks, its spokesmen issued an angry rebuttal. In
reality, its profitability had been poor in the late 1980s, and there were
more problems on the way because it had engaged in a reckless lending
binge, providing far too much money to real estate developers in the
Washington area. At First American Bank of Virginia, the largest unit
in the group, 27.6 percent of total assets were in real estate lending. At
the Maryland bank, the figure was more than 30 percent — higher
than at several other local banks. American Security Bank of Washing-

The Shutdown

( 32.5

ton had 24 percent of its assets in real estate loans, while the figure at
Riggs National — the capital’s largest bank — was just 11 percent.
Moreover, First American’s capital base was inadequate, in the regu¬
lators’ view.

After proof emerged that BCCI owned First American, Clifford and
Altman said that they — like the regulators — had been duped by
BCCI. They also insisted that BCCI had no influence on how the
company was managed. In fact, there appear to be several signs of
negative influence.

First American had expanded aggressively in New York in the early
1980s because it was encouraged to do so by “the investors,” accord¬
ing to a former top official of the company. The New York unit never
earned more than $2.6 million in any one year, and those “earnings”
were inflated by accounting gimmickry. (A large part of the New York
bank’s lease payments on its headquarters was charged to the parent
company, which had the effect of understating the bank’s expenses and
thus overstating its profits.)

First American’s takeover of NBG could be another example of
pernicious influence by BCCI. Several observers believe that First
American paid too much in what may have been a scheme to transfer
money from First American to BCCI. Clifford and Altman have con¬
tended that this was an arm’s-length transaction. At the time of the
deal, however, Clifford stated that First American was encouraged by
its Arab shareholders to buy NBG.

Among the most dubious deals were investments in certificates of
deposit (CDs) issued by one of BCCPs most notorious units, ICIC, in
the Cayman Islands. In 1986 and 1987, First American bought $74
million in CDs, even though ICIC was not a conventional bank but a
secretive dummy company controlled by Abedi and Naqvi. Moreover,
according to the Fed, First American received below-market rates of
interest.

Altman continued to deny in the summer of 1991 that BCCI had
influenced First American. Speaking through his lawyer, he said, “It is
absolutely not true that First American was a source of funds for
BCCI. All money from the Middle East flowed into First American.
Both internal audits and exams by the regulators confirmed there was
not a single instance of improper financial dealings with BCCI.”

Even without these peculiar deals, the stench of the BCCI connec¬
tion was highly damaging to First American. Some depositors began
pulling their money out after Regardless and the Wall Street Journal

FALSE PROFITS

326 )

published their exposes in May 1990. The real hemorrhage began after
the July 1991 shutdown of BCC 1 . On August 1, American Banker, a
trade publication, reported that First American’s banks in Washing¬
ton, Virginia, Maryland, and Georgia were losing deposits to rival
institutions. Company officials tried to minimize the problem, but
it was actually quite grave. First American would not own up to it until
well into 1992. In April of that year, it released its 1991 annual report,
which showed that deposits had dropped by about $2 billion during
the year. In an effort to maintain confidence, First American’s Wash-
ington-area banks posted stickers on many of their automated teller
machines reminding customers that their monies were protected by the
Federal Deposit Insurance Corporation. The stickers started appearing
before the shutdown. To counter negative publicity, all depositors
were sent pamphlets in which First American sought to play down the
BCCI connection.

The seizure of BCCI killed an effort by Charles McC. Mathias, a
First American board member and a former U.S. senator from Mary¬
land, to bolster confidence in First American by placing its stock in the
hands of a trustee. The man Mathias had in mind was Paul Volcker, the
chairman of the Federal Reserve Board from 1979 to 1987. He is an
old friend of Mathias’s, and the two men sit on the board of the
German American Foundation. Volcker is one of the most respected
figures in international finance, but he also bears some of the responsi¬
bility for the First American mess. It was during his tenure as chairman
that the Fed allowed BCCI’s clients to acquire First American. Volcker
seems somewhat amnesiac about the takeover. Occasionally in 1991
he even referred to the seized bank as BBCI.

The Federal Reserve was certainly nervous about First American’s
financial condition. When the July 29 order was considered at a Fed
board meeting, William Taylor, the director of banking supervision,
noted that the company had suffered an outflow of deposits. The
board agreed unanimously that Clifford and Altman had to go.

Neither Clifford nor Altman was named in the Morgenthau indict¬
ment or the Fed orders, but their claims to have known little about
BCCI’s activities were regarded as increasingly improbable. Unable to
convince the regulators that they had merely been duped by Abedi and
his cohorts, they resigned on August 13. Clifford was replaced as
chairman by Nicholas deB. Katzenbach, who had been an attorney
general in the Johnson administration and later general counsel to
IBM. Clifford had pushed hard to ensure Katzenbach’s appointment.

The Shutdown

( 3 2 7

It is unclear why the Fed thought Clifford should have any say in the
matter. At the time, he was under investigation for violating banking
laws. The appointment of Katzenbach is surprising for another reason.
Before taking over First American, he had served on the board of
Miami’s Southeast Banking Corporation, which was in disastrous fi¬
nancial shape. In September — within weeks of Katzenbach’s arrival at
First American — the Miami banking company collapsed. Nine
months later, the bankruptcy trustee would sue Katzenbach and other
former directors, accusing them of gross mismanagement and negli¬
gence. Katzenbach has denied any wrongdoing. *

At the time of his resignation, Clifford tried to promote the idea that
First American’s problems were a matter of image rather than sub¬
stance. Announcing his departure, he told reporters he was concerned
that “highly sensationalized publicity” might hurt the company. He
stoutly defended his record at First American and said that during the
past decade it had become “the largest and one of the most respected
bank holding companies in Washington, D.C.”

But Clifford and Altman would increasingly be forced to defend
themselves in the press, in congressional hearings, and in interviews
with prosecutors in New York and Washington as more information
about their tenure at First American filtered out.

The seizure of BCCI focused enormous attention on the bank in the
news media, with another wave of press coverage after the Morgen-
thau indictment and the Fed order of July 29. There were front-page
stories in major newspapers, special television reports, and cover sto¬
ries in Time, Newsweek, and the Economist . Months later, in a survey
of American newspaper editors, BCCI was ranked as the second most
important business story of 1991 — surpassed only by the recession.
The Wall Street journal disclosed the contents of one of Price
Waterhouse’s 1989 special audits in a page 1 feature published a week
after the shutdown. The article discussed BCCI’s huge loans to the
Gokals and to such front men as Pharaon, Adham, and Khalil.

News of BCCI’s links to terrorists also leaked out. Ghassan Ahmad
Qasim, the manager of BCCI’s branch on London’s trendy Sloane
Street, told reporters that the infamous terrorist Abu Nidal had used

*A Federal Reserve official says that Katzenbach was chosen by First American’s board
of directors. The Fed knew about the problems at Southeast but did not feel that they were
adequate grounds to veto the appointment.

FALSE PROFITS

328 )

the bank extensively. The banker said that he had even accompanied
Abu Nidal on shopping trips around London. One of the terrorist’s
operatives, Samir Najm al-Din, had put tens of millions of dollars in
the bank in 1981. There were also disclosures about BCCI’s involve¬
ment in covert operations, including its role in financing arms sales to
Iran orchestrated by Oliver North and his associates. The most sensa¬
tional article was a cover story in Time magazine alleging that there
was a “black network” operating out of BCCI’s Karachi office, front¬
ing for an armed criminal gang of international mafiosi involved in
extortion, bribery, kidnapping, and murder. Substantiating Time's as¬
sertions proved difficult. Pakistan’s finance minister, Sartaj Asis, de¬
nied them outright, saying to Britain’s Financial Times , “I am not
aware of any such activities.”

The growing scandal prompted congressional investigations. Sena¬
tor Kerry, who had been looking into BCCI since 1988, began a series
of hearings on the bank. Testifying on August 1, Jack Blum and
William von Raab blasted BCCI’s lawyers and lobbyists for their role
in the affair. A few days later, Masihur Rahman, BCCI’s chief financial
officer, told the Kerry Committee that a bank official had threatened to
kill him if he revealed what he knew. Just before Rahman left BCCI on
August 1, 1990, he quarreled with two of his colleagues, he told the
Senate panel. One of them “became furious,” Rahman recounted,
saying, “If you open your mouth, or if you go to court, I’ve personally
killed people in my life in Multan in Pakistan, and I’ll use the same gun
on you.”

The banking committees of both the House and the Senate also
announced hearings on BCCI. The House panel turned out to be quite
aggressive, thanks to its chairman, Henry Gonzalez. Things were
somewhat different on the Senate committee, which is better known
for participating in financial scandals than for investigating them. Five
members, including the chairman, Donald Riegle of Michigan, had
been investigated for taking huge campaign contributions from
Charles Keating, the savings and loan crook. Because of the Keating
Five affair, one congressional staff member jokes that Senate Banking
is “the best committee money can buy.”

Some of the biggest apparent culprits in the BCCI affair seemed to be
well beyond the reach of Western law enforcement agencies. In many
cases they were living in luxury on the monies they had stolen. Pha-
raon, for example, flitted between Pakistan and Saudi Arabia, though

The Shutdown ( 329

he had to cancel a stay on his yacht in Cannes in August for fear of the
French authorities.

In early September, Sheikh Zayed’s government arrested more than
thirty BCCI employees, including Swaleh Naqvi, the man who had
orchestrated the multibillion-dollar Ponzi scheme. Ostensibly, the ar¬
rests showed that Abu Dhabi was eager to get to the bottom of the
scandal, but there was widespread skepticism in the West. If Zayed
wanted to uncover the truth, why were American and British investi¬
gators prevented from interrogating the detainees? This stubborn re¬
fusal to make witnesses available increased the suspicions in the West
about the possible involvement of members of Zayed’s circle.

In Pakistan, there was widespread skepticism of the BCCI seizure,
which several commentators ascribed to Western jealousy of the
bank’s success and to anti-Muslim prejudice. The old canard about a
“Zionist conspiracy” was repeated. There seemed to be little likeli¬
hood that Abedi, who was living in Karachi, would ever be turned over
to law enforcement authorities in the West. Jam Sadiq Ali, the gover¬
nor of Sind province, in which Karachi is located, said publicly that he
would not allow the banker to be extradited. The governor’s protective
attitude was understandable. When he lived in exile in Britain, Abedi
had given him money and a house in the Belsize Park section of
London.

Abedi’s wife, Rabia, conveyed her husband’s reaction to his indict¬
ment by the New York County grand jury. He insisted he would be
cleared. His nonchalance seems to have been warranted. When the
Western bank regulators ordered the seizure of BCCI, Pakistan was
one of the few countries not to comply, and on Monday, July 8, BCCI’s
three Pakistani branches opened as usual. A spokesman for the State
Bank of Pakistan said, “BCCI hasn’t violated any banking rules in
Pakistan and there is no complaint against it.” But depositors didn’t
believe him; crowds surged around BCCI’s offices in Karachi,
Rawalpindi, and Lahore, withdrawing their funds.

In September, Abedi’s lawyers published an advertisement in the
Pakistani press warning reporters to watch what they said about him.
The ad, signed by Sher Sultan Pirzada, a former Pakistani attorney
general, appeared on the front page of Dawn, an English-language
daily. “Mr. Abedi’s integrity is unassailable,” it insisted. “The allega¬
tions and criminal charges are defamatory, baseless, unwarranted and
unjustified.”

Clifford and Altman

He has been calle Dan elder statesman of the Democratic party,
a superlawyer, even a Washington monument. Thus, it was only to be
expected that, after more than four decades in public life, Clark
McAdams Clifford would recount his life and career in a book.

Clifford’s memoirs, co-authored by Richard Holbrooke, a former
State Department official, is a weighty tome that deals principally with
his life in public service, as reflected by its title, Counsel to the Presi¬
dent. It was published with great fanfare in the spring of 1991, and
extracts appeared in the prestigious New Yorker magazine. A book
party was held at the home of Pamela Harriman, the widow of Gover¬
nor Averell Harriman of New York, another adviser to presidents. In
her own right, Pamela Harriman has been a major force in the Demo¬
cratic party as both a campaign contributor and a spotter of political
talent.

On the evening of May 22, hundreds of guests arrived at Harriman s
elegant town house on N Street in the heart of Georgetown. Some of
the most powerful people in Washington were there, including House
Speaker Tom Foley and such fellow House Democrats as John Dingell
of Michigan, Jack Brooks of Texas, Steny Hoyer of Maryland, and
Patricia Schroeder of Colorado. Representing the Senate were Demo¬
crats Edward Kennedy of Massachusetts, Alan Cranston of California,
Claiborne Pell of Rhode Island, Paul Simon of Illinois, Christopher
Dodd of Connecticut, Howard Metzenbaum of Ohio, Sam Nunn of
Georgia, and Frank Lautenberg of New Jersey. Media heavyweights at
the party included William Safire of the New York Times, A 1 Hunt of
the Wall Street Journal, Jack Nelson of the Los Angeles Times, Tim

( 33 ° )

R eu ters/Bettman n

Clark Clifford and Robert Altman swear to tell Congress the truth,
September n, 1991

The mastermind:
Agha Hasan Abedi
in his prime

Bruno Barbey/Magnum

Financial Times/photograph by Terry Kirk

AP/Wide World Photos Bob Morris/Sygma AP/Wide World Photos

The Saudi spymaster Kamal
Adham, a BCCI insider and
the lead investor in Washing¬
ton, D.C.’s First American
Bankshares

Right: BCCI beneficiaries
Jimmy Carter and Bert Lance

Below left: Presidential first¬
born George W. Bush (at right)
and Arkansas financier
Jackson Stephens, the man
who helped BCCI buy into
Washington

Below right: CIA Director
George Bush, 1976

Mike S/eMwf/Arkansas-Democrat Gazette

Aritaud de Borcbgrave/Gamma Liaison Courtesy , Carter Presidential Center

Denver Post Mark Reinstem/UNIPHOTO

Superlawyer and Wonder
Woman: Clark Clifford with
Lynda Carter, Robert Altman’s
wife

Below left: Cable TV entre¬
preneur and BCCI associate
Bob Magness
Below right:

CIA chief William Casey

Roger Sandler/UNI PHOTO

Above: U.S. Customs chief William von Raab, investigator Jack Blum, and Sen¬
ator John Kerry

Below left: Under arrest: Amjad A wan (at center right) and his colleagues in
Tampa, October 8, 1988

Below right: French authorities nab Syed Ziauddin Ali Akbar, September 5,

19.9 1 Tampa Tribune/S/ptf-/V<?ss Reuters/Bet

UPI/Bettmann

Above left: BCCI’s
friend on the Hill:
Utah’s Republican
senator Orrin Hatch
Above right: CenTrust’s
David Paul, the shady
S&L operator, gener¬
ous political donor,
and BCCI partner

ffer/Folio

C. W. Griffin /Miami Herald

Ailing financier:
Agha Hasan Abedi.
Pakistan, 1991

' tjf,

The Manhattan D.A. and his sleuths ( foreground , clockwise from left):
John Moscow, Robert Morgenthau, and Michael Cherkasky

Harry Benson

Clifford and Altman ( 331

Russert of NBC News, and Katharine Graham, the chairman of the
Washington Post Company.

Finally, there were Clifford’s fellow Washington power brokers:
Richard Moe, Frank Mankiewicz, Lloyd Cutler, Sol Linowitz, and
James Symington. Mankiewicz’s firm, Hill and Knowlton, had done
public relations work for both BCCI and First American, as we have
seen. James Symington, a former congressman, was the son of the late
Senator Stuart Symington, an old friend of Clifford’s who served on
First American’s board.

It should have been a glorious moment, a time to celebrate a lifetime
of achievement. Instead, something of a pall hung over the proceed¬
ings, for Clifford’s memoirs were coming out at the height of the
investigations into BCCI and First American. In fact, the day after the
party, officials of the Federal Reserve told the Senate Banking Commit¬
tee that they had been deliberately misled for a decade about the
ownership of First American.

Clifford was so anxious to avoid having his reputation tainted by
the BCCI scandal that he tried not to mention the bank at all in his
memoirs. When it became clear that the subject could not be omitted
entirely, a long footnote was added shortly before the book went
to press. “In 1991,” he began, “an unfortunate controversy arose
concerning the relationship between First American and an interna¬
tional bank, the Bank of Credit and Commerce International (BCCI).”
Clifford went on to describe how First American was acquired and
how he was asked to become chairman. “The investors and BCCI,” he
wrote, “never interfered with our operations.” After BCCI came under
scrutiny in 1988, investigators “began examining the possibility that
certain secret financial dealings overseas resulted in an illegal transfer
of control of certain shares of First American stock to BCCI.” Clifford
said that when he “was first informed that United States law might
have been violated, I was both appalled and embarrassed. Never, in
my nine years as the bank’s chairman, had I received any instruc¬
tions from any BCCI representative.” He said that if “the Federal
Reserve Board and other authorities had been deceived, so had I.” He
asserted that First American had been a well-run bank, and he con¬
cluded, “No event in my entire career caused me greater anger and
outrage.”

Throughout 1991, Clifford was on the defensive. He and Robert
Altman, his partner and longtime protege, were interrogated by jour¬
nalists, prosecutors, and congressional committees. After years of

FALSE PROFITS

33 z )

being regarded as pillars of the establishment, they were now sus¬
pected of fronting for an international criminal enterprise. At one
point Clifford felt obliged to say that “the furthest thing from my mind
would be to pernlit myself or my partner to become involved in some
criminal conspiracy.”

The lawyers’ claims that they were ignorant of BCCI’s role were
greeted with widespread skepticism — sometimes derision. The col¬
umnist Michael Kinsley compared Clifford to Captain Reynault, the
French prefect in Casablanca, who was “shocked, shocked” to learn
that gambling was going on at Rick’s Cafe. (An employee of the cafe
then handed Reynault his winnings.) Altman and his wife were even
the subjects of a story in a sleazy tabloid called the Globe, wonder
woman’s hubby probed in drug scandal, the headline screamed.
The kicker read: “Shattered Lynda was queen of Washington, now
nobody wants to know her.”

The central question asked of Clifford and Altman was the one that
had dogged Richard Nixon during Watergate: What did they know
and when did they know it? What, specifically, did they know about
BCCI’s relationship with First American? When did they learn that
BCC 1 owned the U.S. banking institution? The first time they had a
chance to provide detailed answers in a public forum was at a hearing
of the House Banking Committee.

On the morning of Wednesday, September n, 1991, the Wright Pat¬
man Room of the Rayburn Office Building was filled with reporters,
photographers, and spectators. It was appropriate that the hearing
would be held in a room named for Patman. The late Texas congress¬
man had been a feisty populist who was suspicious of the power of the
big banks. As chairman of the Banking Committee, he was a driving
force behind the Bank Secrecy Act, which requires banks to report
large cash transactions. It was this law that helped spur investigations
of money laundering, including Operation C-Chase, which led to the
indictment of BCCI. When Patman held hearings in the 1960s, one of
his star witnesses was Robert Morgenthau, then the U.S. Attorney in
Manhattan, who had prosecuted financial criminals. That was a quar¬
ter of a century before Morgenthau — as Manhattan’s D.A. — helped
bring BCCI to justice. The current chairman of the committee, Henry
Gonzalez, is a Texas populist in Patman’s tradition. Regarded as fear¬
less and scrupulously honest, he was willing to follow the BCCI trail
wherever it led.

Clifford and Altman ( 333

When Clifford and Altman arrived, they were a study in contrasts.
Clifford was eighty-four years old, with wavy silver hair and a pale
complexion. He walked slowly up the aisle and took his seat before the
committee. His gray fedora was in his hand — a reminder that he was
of another generation, another era. Altman, roughly half Clifford’s
age, had black hair and a dark complexion. Despite these differences,
his mannerisms sometimes mirrored those of his mentor. Altman
would press his fingertips together in what has been called “the Clif¬
ford steeple.”

The two lawyers were accompanied by their wives. Margery Pep¬
pered Kimball Clifford, known as Marny, was the picture of the upper-
class matron in her black dress and pearls. Lynda Carter Altman wore
a tight minidress and seemed to personify Hollywood glitz. The two
women took their seats behind their husbands.

Gonzalez called the committee to order and made his opening state¬
ment. The purpose of the hearings, he said, was to determine how
BCCI — which he said was “tantamount to a racketeering bank” —
had “gained a foothold in the United States, and how regulators and
bank officials failed to detect or understand, or report, the invasion.”
He then turned his fire on Clifford and Altman. Referring to the
millions of dollars they had earned in legal fees and stock deals, he
said, “If Mr. Clifford and Mr. Altman did not understand BCCI’s role
in the takeover of First American, they did have an appreciation of the
value of BCCI’s money.” The chairman was particularly disturbed by
the potential conflicts of interest arising from their roles as executives
of First American and lawyers for the bank. “Bank officers,” he said,
“cannot serve one moment in the decision-making capacity in the bank
and, in the next moment, don their legal caps to give sanction to these
same decisions.”

There was another apparent conflict of interest that Gonzalez could
have cited. In connection with the banking committee’s probe (and
other investigations), Clifford and Altman were represented by Robert
Bennett and Carl Rauh of Skadden, Arps, Slate, Meagher & Flom.
Throughout the hearing, Bennett sat behind Clifford and often whis¬
pered advice into his ear. Skadden, as noted in Chapter 3, had repre¬
sented First American (then called Financial General) during the take¬
over battle. Lawyers for the New York firm dug up considerable
evidence that BCCI was a shady outfit and that Abedi’s Arab clients
were front men for BCCI. The opposing legal team was, of course,
headed by Clifford and Altman. Now, two lawyers from Skadden were

FALSE PROFITS

334 )

arguing that Clifford and Altman had no way of knowing that BCCI
was a sleazy bank or that the Arabs were front men/*

The chairman’s criticisms were mild compared with the open¬
ing statements of some of his colleagues. To be sure, some members
leavened their criticism by paying homage to Clifford’s accomplish¬
ments in government service. There was effusive praise from Joseph
Kennedy of Massachusetts, whose uncle, the late president, had been
a client of Clifford’s. The young congressman described Clifford
as “one of the greatest public servants in modern American his¬
tory.” The poignancy of the occasion was captured by Democrat Jim
Bacchus of Florida, who said that Clifford was under investigation at
a time of his life when he should be able to look back on his accom¬
plishments. “I’m very saddened to see you here,” the congressman
said.

Most committee members, however, showed only slight deference
to Clifford, portraying him as little more than a liar. Some of the
harshest comments, not surprisingly, came from Republicans. Chal¬
mers Wylie of Ohio, the ranking Republican on the committee, said
that Clifford and Altman “almost certainly had to be aware that First
American maintained an extensive relationship with BCCI.” None
was more aggressive than Wisconsin’s Toby Roth. “Mr. Clifford and
Mr. Altman, I’ve looked at the facts presented to this committee and
studied your statements,” he said. “And it pains me to say this, but
others may believe your story, but I must say I don't believe a word
of it.” The two lawyers, he continued, “allowed a vast criminal enter-

*In 1978, Skadden had argued in a seventy-one-page legal brief filed in U.S. District
Court in Washington, D.C., that BCCI had “closely controlled and directed” the acquisi¬
tion of a big block of First American stock.

When Bennett was asked about this apparent conflict of interest in the fall of 1991, he
said that he and his colleagues had “thoroughly examined” the matter and had “determined
there were no conflicts.” He pointed out that he hadn’t joined Skadden until April 1990,
long after the takeover battle. (Rauh joined at the same time.) Moreover, Clifford and
Altman did not object. (Skaddcn’s former client — First American — had to give its
permission, but it, of course, was controlled by Clifford.)

Others were not so sure. Peter Brown, who was employed by Skadden as a paralegal
during the takeover battle and spent some time on the case, expressed strong criticism. “The
news that Skadden has switched sides,” he said, “magnifies the incestuousness of this whole
affair in Washington.”

There were other possible conflicts concerning Skadden’s Carl Rauh. He had repre¬
sented Akbar Bilgrami, one of the BCCI officers convicted in the Tampa drug money case.
(Clifford and Altman, of course, had recruited the lawyers for the individual defendants.)
Bilgrami has said that he gave Rauh permission to work for Clifford and Altman.

Clifford and Altman ( 335

prise to gain a foothold in the United States.” Roth said the com¬
mittee’s investigation had shown that “you have been in bed with
BCCI for at least ten years. You’re telling us all you got was a back
rub.”

Democrat Charles Schumer of New York used milder language, but
his message was much the same. Clifford and Altman, he said, “are
asking us to believe that when their house was on fire, they didn’t smell
the smoke, feel the heat, or hear the alarms. They claim they were
duped.” The lawyers’ defense of themselves, said Schumer, “assumes a
high degree of naivete and disinterest that is out of character with men
of such business acumen. Their explanation strains credulity to the
breaking point.”

Soon it was time for Clifford and Altman to state their case. Con¬
gressional hearings were familiar to Clifford. He had often appeared
before such committees to defend clients in trouble. Bert Lance —
the client who had introduced him to Abedi — was one notable
example. Clifford was such an effective advocate that senators and
congressmen sometimes seemed in awe of him. This time, however,
he had been cast in an unfamiliar role: as the target of an investiga¬
tion.

Referring to himself and Altman, Clifford told the committee that
“our consciences are clear. We have not been guilty of not only any
legal infraction, we’ve not been guilty of any misconduct and not even
conscious of being guilty of any impropriety on our part.” Throughout
his presentation he referred to his honor, integrity, and reputation.
“What I tell you today,” he said at one point, “will be the total and
complete truth.” In his sixty-three years as a lawyer, “there has never
been a cloud placed against my name until now.”

Rather than reading his prepared statement, Clifford decided to talk
about his involvement with BCCI and First American in a narrative
fashion. If anyone thought that his age had seriously diminished his
mental faculties, this presentation proved otherwise. The octogenarian
showed a mastery of detail that would have been impressive in a man
half his age. Seldom referring to notes or documents, he spoke force¬
fully and eloquently. During the presentation, he touched all the right
chords. He mentioned his role as an adviser to Presidents Truman,
Kennedy, Johnson, and Carter — a reminder of his status as an elder
statesman of the Democratic party. He also referred to his long legal
career — something likely to evoke sympathy from a panel filled with
lawyers — and to his desire to remain active and useful in his old age.

FALSE PROFITS

336 )

When he agreed to take over the chairmanship of First American, he
did so not for the money hut because he feared drifting away from life.
“I’ve worked all my life. That’s what my life has been, just work. And
it’s kept me alive and kept me able — 1 hope able — and kept me
vigorous. I didn’t want to retire. I didn’t want to just sit on the porch
and rock and wait to die.” He later added wistfully, “I think it’s been
good for me until this last year. Maybe it’s kept me alive for nine more
years.”

Most of Clifford’s remarks, of course, were devoted to his relation¬
ships with BCC 1 and First American. He said that his law firm began
representing BCCI and its Arab clients in early 1978, when they were
accused of violating U.S. securities laws in their initial purchases of
First American stock. Before accepting BCCI as a client, Clifford made
sure it was reputable. One indication of its high standing was that
Bank of America was a major shareholder. There were other signs as
well, including a favorable article about BCCI published by the Econ¬
omist in 1977. When the Arab investors sought regulatory approval to
take over First American, Clifford investigated their backgrounds and
found that “they were persons of reputation, wealth, and stature.” He
also provided a justification for his and Altman’s investments in First
American stock. The lawyers had received little compensation for
running the company and felt that the stock deal was an appropriate
reward.

As for BCCI’s influence, Clifford said, “At no time did BCCI exert
any control whatsoever over First American.” He stated firmly, “You
have my word for it — I give you my word under oath, at no time did
we turn to them for a decision.”

If it seemed hard to believe that Clifford and Altman had been
deceived about BCCI’s character and its ownership of First American,
Clifford noted that many others had apparently been deceived as well,
including the Bank of England, Lord Callaghan, Price Waterhouse,
and Jimmy Carter. Clifford again touched on his reputation. He said
he was “going to work as hard as I can in an effort to preserve my good
name.”

Altman’s statement was shorter and less emotional. In a flat bari¬
tone, the lawyer insisted that “First American was not controlled by
BCCI in the management decisions that were made.” Abedi, he said,
acted as “an investment adviser to the shareholders” and as “the
communications link between us and the shareholders,” but the bank
did not control First American. “We are secure in the knowledge that

Clifford and Altman ( 337

whatever concealed interests BCCI may have had never translated into
actual control over First American’s operations.”

Clifford’s statement had been a tour de force, helping to explain why
he had been such a formidable figure. During a break in the proceed¬
ings, Congressman Wylie said, “Mr. Clifford is most impressive. Mr.
Clifford could sell hams in a synagogue.” But when the questioning
began, it quickly became clear that most members still doubted that
Clifford and Altman had been ignorant of BCCI’s true role.

Chairman Gonzalez made much of the fact that Clifford and Alt¬
man wore many hats — as directors, shareholders, lawyers, and bank
executives. These multiple roles even put Altman into the position of
writing a letter to himself. On one occasion, Robert A. Altman sent a
letter on behalf of First American’s parent company to all of the
company’s shareholders — including Robert A. Altman. Just about
everyone in the room, including Altman, burst into laughter when
Gonzalez said, “Now it seems to me that the only place I’ve seen where
anybody can be in two places at the same time is in Star Trek.”

Wylie said that although Clifford’s presentation was impressive,
“it did not pass the so-called straight-face test.” He questioned Alt¬
man about his handling of the Fed’s investigation of BCCI’s loans
to First American shareholders. When William Ryback of the Fed
wrote to Altman seeking information about those loans, the congress¬
man asked, why did Altman fail to reveal that he and Clifford had
financed their own investments in First American by borrowing from
BCCI?

Altman replied that he spoke with Ryback after receiving the letter
and was told that the Fed was interested only in loans from BCCI to
the original investors in First American and loans to current investors
that were still outstanding. Since Clifford and Altman were not among
the original investors and had repaid their loans, there was no need to
disclose them to the Fed. (Ryback has said he does not recall altering
his request.)

The harshest remarks again came from Toby Roth, the Wisconsin
Republican. Addressing Clifford, he said, “You reported regularly to
BCCI on the operation of your bank. You yourself have mentioned
you went to London twenty-six times, and Mr. Altman reported as
well. You provided them with financial statements. You even cleared
job candidates with BCCI. You went to BCCI conferences. You even
accepted BCCI payments for your legal fees. . . . And it’s interesting

FALSE FROF1TS

338 )

that they didn’t come to you, but you went to them in London. So if
you weren’t reporting like good subordinates to the real owners, what
did you think you were doing?” Roth concluded with a tirade against
political insiders: “I think that the insiders in this country are milk¬
ing — they know the system and they are milking the system, and the
people are going to get as upset with our government and with what’s
going on in Washington as they did in the Soviet Union, they are going
to come and clean up Washington one of these days.”

Henry Gonzalez was not only concerned about the conduct of Clifford
and Altman, he also wondered why First American’s board of direc¬
tors seemed oblivious of BCCI’s true role. Clifford had packed the
board with close friends, including Altman and three aging cronies:
James Gavin, Elwood Quesada, and Stuart Symington. Two members
of the geriatric trio died before the BCCI scandal exploded: Symington
died in December 1988 at the age of eighty-seven, Gavin fourteen
months later at eighty-two.

Clifford’s dominant role was amply documented in the lawsuit filed
in the late 1980s by former minority shareholders of First American
Bank of Virginia. Directors of both the parent company and the Vir¬
ginia bank testified that Clifford essentially ran the company as an
autocracy — admitting, in effect, that the board members were little
more than ciphers. One startling example of the lack of oversight
emerged in early 1991, when the Washington Post revealed that Clif¬
ford and Altman had purchased stock in First American’s ultimate
holding company, CCAH (Credit and Commerce American Holdings),
with loans from BCCI. Clifford and Altman said the deal had been
approved by CCAH’s board members. At the time, the board consisted
of four people: Clifford, Altman, Symington, and Quesada. By 1991,
Symington was conveniently dead and Quesada said he couldn’t re¬
member whether he had approved the deal.

The conduct of the board was the focus of a hearing by Gonzalez’s
committee on September 27, roughly two weeks after Clifford and
Altman testified. Five directors of First American — three of whom
were also officers — appeared as witnesses. Gonzalez made his skepti¬
cism clear in his opening statement: “Unfortunately, too many direc¬
tors bring to the table only one thing — a huge rubber stamp with one
word, ‘Yes,’ for all management decisions.” The directors claimed to
have known nothing about BCCI’s secret ownership of the company.
What is more, they said, they had not even known the names of the

Clifford and Altman ( 339

Arab stockholders until quite recently. Vincent Scoffone, the senior
vice president and treasurer, said under oath that he did not know the
investors’ names until early 1991. This remark seemed odd, since most
of the Arabs’ names had been published in May 1990 in the Regardie’s
article.

Clearly, a position on the board of First American or one of its
subsidiary banks was not very demanding. It could be quite rewarding,
however. In addition to receiving director’s fees, several board mem¬
bers borrowed substantial sums of money. At the end of 1989, loans to
directors of First American Bankshares and its subsidiaries exceeded
$200 million. Three directors owed more than $30 million apiece. And
some board members also got business from the bank. Robert Gray’s
firm, Hill and Knowlton, did public relations for First American. The
law firm of former Senator Mathias —Jones, Day, Reavis & Pogue —
also received fees from First American. Directors of First American
told the committee there was nothing questionable about this because
Mathias did not participate in the decision to use his firm.

At one point in the hearing, Mathias said he had asked Clifford
about the stockholders after joining the board in the late 1980s. “He
responded that they were the most wonderful people,” Mathias re¬
called. That was presumably enough to satisfy his curiosity. At the time
of the hearing, it appeared that the former senator still failed to grasp
the nature of the BCCI-First American relationship. He testified that
First American’s stockholders had contributed more than $400 million
in capital over the years — apparently unaware that much of the
money had been stolen from BCCI’s depositors.

The House Banking Committee was not the only congressional panel
looking into Clifford and Altman’s role at First American. On October
24, the lawyers appeared before the Senate’s Kerry Committee, which
had been probing BCCI for years. The atmosphere was more cordial,
but the questioning was generally more incisive.

Senator Hank Brown of Colorado, the ranking Republican on the
committee, is both a lawyer and a certified public accountant, and he
questioned Clifford and Altman closely about their investment in First
American’s stock, which they had financed with nonrecourse loans
from BCCI. Brown pointed out that it was a no-risk deal, that “if the
value of the stock went up, you could enjoy the value of that stock. If
the value of the stock went down, you would have no liability.”

Kerry confronted Clifford and Altman with a series of documents

FALSE PROFITS

340 )

that suggested BCCI had been heavily involved in the affairs of First
American Bank of New York. When the bank was being launched in
1982, one man who helped get it off the ground was Khusro Elley,
BCCI’s senior officer in New York. Elley helped to lease space for
FABNY’s Park Avenue headquarters and assisted in a variety of other
matters. On October 13,1982, he wrote to Swaleh Naqvi, then BCCFs
number-two man, referring to a recent meeting with Altman. Among
the matters Elley said they had discussed were the leasing of FABNY’s
headquarters; the selection of board members; the recruitment of key
staff; the selection of auditors, lawyers, and data processing equip¬
ment; employee compensation; the projection of the first year’s opera¬
tions; and coordination with the holding company and its sharehold¬
ers. In 1983, Elley and another BCCI official, Abol Helmy, negotiated
with Bankers Trust officials regarding FABNY’s purchase of several
Bankers Trust branches.

When asked for an explanation of Elley’s involvement in the Bank¬
ers Trust deal, Altman said that Elley was acting at his direction, not
BCCI’s. As for Elley’s involvement in other matters, Altman asserted
that this did not violate understandings with the Fed — since BCCI did
not make the final decisions.

Not long after the Bankers Trust transaction, Elley was hired by
FABNY and soon became involved in a scheme for the joint marketing
of BCCI, National Bank of Georgia, and First American, according to
internal BCCI documents. The joint marketing was apparently made
official in something called the Americas Coordinating Committee of
the Bank of Credit and Commerce International. Clifford and Altman
said this was done behind their backs.

When the congressional hearings concluded, there was still no proof
that Clifford and Altman knew that BCCI had owned First American.
Nonetheless, there was a multitude of clues — dating from the earliest
days of the takeover battle — that could have alerted them to BCCI’s
true role.

• BCCI was obsessed with growth, and it established a presence in
every major market where it was permitted to do so: in Britain,
continental Europe, and throughout the Third World. Did it not
seem odd to Clifford and Altman that BCCI would be content
with nothing more than a few branches in the United States, the
world’s largest economy?

• The Arab investors were not only passive, they were all but

Clifford and Altman ( 341

invisible, as noted in Chapter 4. Altman himself said that the
Middle Eastern investors were told nothing about First Amer¬
ican’s buyout of the Virginia bank’s minority stockholders, al¬
though it was a $30 million deal.

• After First American acquired National Bank of Georgia from
Pharaon in 1987, it discovered pervasive BCCI influence there,
according to Altman’s testimony before the Kerry Committee.
Did it not occur to Altman that this suggested that Pharaon was
a front man for BCCI? If BCCI was willing to use one front man
to control NBG, does it not follow that it would be capable of
using other investors to pose as owners of First American?

• Clifford and Altman bought stock in First American with nonre¬
course loans from BCCI, meaning that if they failed to service the
loans, the stock would fall into BCCI’s hands. Did it not occur to
them that First American’s Arab shareholders might have bought
their stock in exactly the same way?

BCCI was not only forbidden to own stock in First American, it was
also barred from exercising “controlling influence” over it. This
meant, in essence, that First American had to be managed as a wholly
autonomous institution. Nevertheless, journalists and congressional
investigators turned up an extraordinary number of instances in which
BCCI was involved in First American’s affairs. Examples included the
involvement of BCCI officials in the launching of FABNY, the purchase
of the Bankers Trust branches, schemes for the joint marketing of
services, and even the hiring of executives. Two senior officials were
interviewed by Abedi before they were offered jobs: Robert G. Stevens,
who served as president of First American Bankshares from 1982 to
1989, and Bruno Richter, the president of FABNY from 1983 to 1985.
When confronted with each example, Clifford and Altman would
typically reply in one of two ways: (1) it was done behind their backs
or (2) it didn’t matter, because BCCI didn’t make the final decisions.

But there were also peculiar financial transactions of which the two
lawyers were fully aware, deals that certainly undermined their claim
of First American’s autonomy. One strange deal was First American’s
1987 purchase of NBG at what many observers regarded as an inflated
price. Another was First American’s investment in certificates of de¬
posit issued by BCCI’s ICIC dummy company. Finally, there were the
investments by Clifford and Altman in First American’s stock, a deal
that could only make them feel beholden to BCCI.

FALSE PROFITS

342- )

In spite of this evidence, Clifford and Altman continued to insist that
they did not know about the secret ownership and that they never
permitted BCCI to influence First American. When that was not
enough to silence the skeptics, they would swear that they were telling
the truth. Clifford, in particular, repeatedly invoked his reputation. At
the Kerry Committee hearings, he said, “Did [BCCI] corrupt First
American? Not in any way. Do I ask you to take my word for that? I
do. My word has been important here for a great many years in
Washington.”

But the credibility of Clifford and Altman was seriously damaged by
a series of dubious statements to regulators, journalists, and congres¬
sional investigators. Clifford, for example, provided several conflicting
accounts of who had asked him to run First American, which resulted
in the following question from the Republican senator Jesse Helms.
“Mr. Clifford,” he asked, “I would like to clear up a question about
who exactly asked you to take over the chairmanship of First Ameri¬
can. In your testimony before the House Banking Committee and in
press interviews, you stated that Mr. Abedi and Mr. Adham asked you
to take the position. In your written responses to questions submitted
by the House Banking Committee, you stated that you were asked by
Mr. Adham. Finally, in your written statement before the House Bank¬
ing Committee, you stated that the investors asked you to take the
post. For the purposes of clarification, just who did ask you to take the
post?”

Many other instances could be cited, but a few are sufficient to make
the point.

• In August 1982, the Federal Reserve asked Clifford about a
Washington Post article that said one of the investors in First
American — Zayed’s financial adviser Abdullah Darwaish — had
been accused of defrauding the sheikh. Clifford, as noted in
Chapter 3, told the Fed he had written to the Post to complain
about “the gross inaccuracies in the article.” When the Kerry
Committee asked him for a copy of the letter, he replied in an
affidavit: “I do not recall having written to the Editor of the
Washington Post in response to that article.”

• In a 1984 interview, Altman discussed how he and Clifford began
representing BCCI and its Arab clients. The relationship, he said,
did not come about through Bert Lance but stemmed from the
law firm’s “international practice.” In 1991, however, he and

Clifford and Altman ( 343

Clifford gave a different version: Lance had introduced them to

BCCI.

• When First American was sued by former minority shareholders
of its Virginia bank, the defense lawyers described the banking
company as 100 percent foreign-owned; they based these state¬
ments, of course, on information from First American’s manage¬
ment. Those statements were false because Clifford and Altman
also held stock in the company.

• In a July 1989 interview, Altman said he had been to only one of
BCCI’s annual management conferences, when he had actually
been to three.

• In May 1990, Regardie’s magazine revealed that BCCI had chan¬
neled at least $500,000 in Noriega money through First Ameri¬
can. When asked about this by the Wall Street Journal, Altman
said that nothing in First American’s files would have revealed
that Noriega money had been channeled through the bank. In
fact, First American cleared dozens of checks with Noriega’s
name clearly written on the memo line.

• In their prepared statement to the Kerry Committee, Clifford and
Altman said, “There is no basis for any suggestion that First
American may have been used by BCCI for money laundering.”
This, of course, is flatly contradicted by the fact that about $7
million in drug money was laundered through First American by
BCCI officials in Operation C-Chase.

• Clifford and Altman have maintained in interviews and congres¬
sional testimony that BCCI became a client in February 1978.
The law firm was hired because BCCI had just been sued by First
American for its role in collecting stock in the banking company.
Investigators have now found two documents that seem to con¬
tradict this version. One is an invoice from Clifford’s law firm
which covers work done in January: Another is a telex to Abedi
from BCCI’s Abdus Sami, stating that Clifford had been hired to
assist BCCI in connection with the stock purchases. The telex is
dated January 30, 1978 — more than two weeks before the
lawsuit was filed.

One of the most sensitive issues for Clifford and Altman is that they
were in constant communication with BCCI over the years and yet had
little contact with the Arab investors who ostensibly owned the bank.
Their response is that BCCI acted as an investment adviser and com-

FALSE PROFITS

344 )

munications link to the Arabs. The problem with this answer is that
they have provided several, often conflicting, descriptions of BCCFs
role.

• In November 1978, Altman said in a letter to the Federal Reserve
Bank of Richmond that BCCI had advised three of the initial
investors in First American: Kamal Adham, Faisal Saud al-Fulaij,
and Abdullah Darwaish. He said that people related to BCCI
would probably advise the investors in the future.

• In April 1987, Altman was quoted as saying that BCCI advises
the investors, presumably meaning all of the investors.

• In October 1988, Altman told the Washington Post that Abedi
(not BCCI) advises the investors.

• In July 1989, Altman said that Abedi advised the initial four
investors in First American until his illness. This is odd because
Abedi became ill in early 1988, yet two of the initial investors
(Sheikh Zayed’s son Sheikh Sultan and Abdullah Darwaish) with¬
drew from the investment group several years before that. It is
also worth noting that Altman did not tell the Washington Post
that Abedi’s advisory role ceased at the time of his illness.

• In March 1990, Altman said that Abedi had advised the investors
at the time of the acquisition. Abedi continued as an adviser to
some of the investors until his health problems. Altman added
that BCCI was not now, as far as he knew, an adviser to the
investors.

• In February 1991, Clifford was quoted in the Washington Post
as saying that he had briefed BCCPs top executives about First
American over the years because the shareholders had designated
BCCI as their adviser.

• In a written statement to the House Banking Committee dated
September 10, 1991, lawyers for Clifford and Altman said that
Abedi had acted as an “investment adviser to the shareholders.”

• In his September 1991 testimony to the House committee, Clif¬
ford referred to Abedi and BCCI as “investment advisers to these
investors.” He also indicated that Kamal Adham was involved in
this process as well. “The shareholders,” he said, “turned the
responsibility of monitoring this investment over to Mr. Abedi
and to Kamal Adham, and we understood that, so we reported
to them rather than going around to report to fourteen other
individual shareholders scattered all through the Persian Gulf.”

Clifford and Altman ( 345

• At the same hearing, Altman identified Abedi alone as the point
of contact: “Mr. Abedi, we were told, had been selected by the
shareholders. He was the investment adviser for these sharehold¬
ers. He was the communications link between us and the share¬
holders.”

• In their prepared statement to the Kerry Committee — and in
their testimony — Abedi the adviser suddenly vanishes. “BCCI,”
says the statement, “performed the same communications func¬
tion with respect to all the shareholders, including Sheikh Zaied
[Zayed] and others.” In oral testimony, Altman said, “It was
understood by the regulatory authorities at the time, not that Mr.
Abedi was the adviser to the shareholders, not that Mr. Abedi
was the communications link, but that BCCI performed and
would continue to perform those functions.”

However it is expressed, this alleged “advisory” role is a critical part
of Clifford and Altman’s defense. The reason they met so often with
BCCI officials and provided information about First American is that
First American’s shareholders wanted them to do so. In view of this,
the Kerry Committee asked lawyers for Clifford and Altman to supply
“all documents that reflect statements by the investors as [to] their
desire that you keep BCCI informed of the financial progress of First
American.” There is apparently no such documentation. On October
11, 1991, the committee received this reply: “Messrs. Clifford and
Altman were not instructed to do so in writing.”

The very notion that Clifford and Altman had to use BCCI to
communicate with First American’s stockholders has been ridiculed by
one former BCCI official, Abdur Sakhia. “They were not Bedouins in
the desert who were being communicated [with],” Sakhia has said.
“These were intelligent people who owned banks and businesses. The
Abu Dhabi Investment Authority has several billion dollars’ invest¬
ment in this country, and if they can manage those businesses they did
not need a channel via Mr. Abedi to First American. They could have
done it directly.”

During his tenure as a leader of Washington’s legal community, Clark
Clifford was the envy of many other attorneys. His firm was not very
large — never more than about twenty lawyers — yet the client list
included some of the most impressive names in corporate America. If
larger firms can be compared to department stores, Clifford &C Warnke

FALSE PROFITS

34^ )

was a boutique, with the patrician elegance of its founder. The decor
resembled that of an old-fashioned men’s club, with dark wood, hunt¬
ing prints on the walls, and leather chairs. There was an air of perma¬
nence about the place; it seemed clear that the firm would outlive its
founder for many years.

Clifford & Warnke did not survive. Like so many other individuals
and institutions, it was engulfed in the BCCI scandal. In October 1991,
a majority of the firm’s seventeen lawyers were reported to be negotiat¬
ing to join another Washington firm, Howrey & Simon. A partner
there told a journalist that he was not concerned about the BCCI taint
because none of Clifford & Warnke’s banking lawyers would be join¬
ing his firm. By early December, only five lawyers remained: Clifford,
Altman, and three others.

The disintegration of the law firm was just the latest in a series of
blows to Clifford and his protege. Their credibility had been battered
in the press and in congressional hearings, and they had lost control of
First American. Now the law practice that Clifford had established
and nurtured was disappearing. But it was not the end of their trau¬
mas. For nearly two years, Robert Morgenthau’s team of prosecutors
and investigators had been gathering evidence on the two Washington
lawyers who had played such an important role in the affairs of BCCI.
Clifford and Altman might soon be fighting for their freedom.

The Watchdogs

On Thursday, September 5, 1991, the U.S. Department of
Justice announced the indictment of Swaleh Naqvi, five other former
BCCI officials,* and a reputed Colombian drug baron, Gerardo (“Don
Chepe”) Moncada, on racketeering charges. The indictment, which
had been returned on August 23, accused the defendants of channeling
millions of dollars in drug money through BCCI. Assistant Attorney
General Robert S. Mueller III said that at BCCI, racketeering was “a
corporate strategy, a corporately countenanced operation.”

The new indictment and Mueller’s tough language made it appear
that federal prosecutors were finally getting serious about BCCI. But
there were a few peculiarities. For one thing, the indictment was based
almost entirely on information developed in Operation C-Chase.
Whereas Robert Morgenthau had broken important new ground in
his indictment of the previous July, the Justice Department was serving
up warmed-over information from an investigation that had ended
nearly two years before.

Another peculiarity was the timing of the announcement. The new
indictment was unveiled just minutes after Congressman Charles
Schumer issued a report that sharply criticized the Justice Department
and other federal law enforcement agencies for their handling of BCCI.
The New York Democrat doubted that this was a coincidence. “I think
they wanted to take the sting out of the report,” Schumer told a

*Also named in this indictment were Syed Ziauddin Ali Akbar, Dildar Rizvi, and three
former officials of BCCI’s Panama operation: Bashir Shaikh, Wilfredo Glasse, and A. M.
Bilgrami (not to be confused with Akbar A. Bilgrami, who had been convicted in the
Operation C-Chase case). Another defendant was Capcom Financial Services Ltd.

( 347 )

FALSE PROFITS

348 )

reporter. “If they had done what we suggested in the report, they
would have had these indictments years ago.”

Justice’s sensitivity about its image was understandable. After the
seizure of BCCI, federal law enforcement agencies were subjected to
withering criticism. BCCI had been used by such notorious criminals
as Noriega, the Colombian cocaine baron Jose Gonzalo Rodriguez
Gacha, and the penny stock fraudster Tommy Quinn — yet for years
the cops had seemed as befuddled as Inspector Clouseau, the clumsy
French detective in the Pink Panther movies.

The Schumer report showed that federal law enforcement agencies
had received valuable information about BCCI long before Operation
C-Chase. In 1983, the Customs Service was tipped off about Munther
Bilbeisi, the Jordanian arms dealer and coffee smuggler who was later
accused of trying to cheat a Lloyd’s of London syndicate. The follow¬
ing year, the Internal Revenue Service was approached by Aziz Reh-
man, the former chauffeur at BCCI’s Miami branch, and told of possi¬
ble money laundering. Although IRS agents in Miami wanted to
launch an undercover investigation of the bank, their superiors said
no. In 1985, agents of the Drug Enforcement Administration and the
IRS obtained strong evidence that BCCI was involved in laundering
heroin money. That August, the head of an Iranian heroin ring intro¬
duced an undercover DEA agent (posing as a drug buyer) to a BCCI
official. The agent taped a conversation in which the banker explained
how to hide and launder drug money. (In the same conversation, there
was an apparent reference to BCCI’s secret takeover of Independence
Bank.) This evidence was turned over to the IRS, which tried to collect
back taxes from the Iranian, but the IRS did not open an investigation
of BCCI.

No one put the pieces together. “Despite the fact that BCCI was
cropping up repeatedly in a variety of places and in an array of ques¬
tionable activities,” said the Schumer report, “no one in the law en¬
forcement community noticed the pattern.” (After this report was
issued, Schumer’s staff did additional research and found that federal
agencies had actually received hundreds of tips relating to BCCI over
the years.) The report also criticized the government’s decision to end
Operation C-Chase in October 1988. Robert Mazur, the lead under¬
cover agent, felt that if the probe had continued, he might have been
able to meet representatives of Pablo Escobar, the cocaine kingpin. The
Customs agent was even trying to set up a meeting with Naqvi, who
was then the head of BCCI.

The Watchdogs ( 349

After the Tampa indictment, the government obtained new informa¬
tion about possible wrongdoing by BCCI, but there was little follow¬
up, partly because of a shortage of money and staff. Documents seized
from BCCI filled dozens of boxes and contained a great deal of infor¬
mation and many further leads, according to the report. But much of
this material was, according to one federal agent, “at best glanced at.”
Schumer’s report put much of the blame on the Customs Service.
Mazur was so disenchanted with the agency that he resigned in early
1991 and joined the DEA. He later compared the C-Chase team to “a
reconnaissance squad that had been out in the middle of the desert and
[was] encountering the enemy, and I sent word back to the fort that we
needed some help. And [we] waited and fought and fought and fought
but no help came.”

The Justice Department also failed to devote adequate resources to
the case. The Schumer report noted that Justice assigned only a hand¬
ful of prosecutors to the case, compared with a veritable army on the
other side. It noted that “over 50 lawyers from 20 different firms
reportedly played a role in the case.”

Schumer backed away from a full-scale condemnation of Justice.
For example, his report rejected attacks on the plea bargain. “Recent
criticisms that the plea agreement was unduly lenient would appear to
be inaccurate,” it said."’

One controversial clause of the agreement was that the U.S. at¬
torney’s office in Tampa would not charge BCCI “with committing
any other federal criminal offenses under investigation or known to
the government at the time of the execution of this agreement.” Of¬
ficials in the U.S. attorney’s office have said repeatedly that this did not
tie the hands of the government. During a hearing on the plea bargain
on February 5, 1990, for example, Greg Kehoe, the first assistant U.S.
attorney in Tampa, told Judge William Terrell Hodges that the agree¬
ment would not prevent other parts of the Justice Department from
going after BCCI. The Schumer report accepts that argument: “The
plea agreement plainly binds only the U.S. attorney’s office for the

*One peculiar feature of the plea bargain that has generally been overlooked is that the
defendant Capcom — which the government knew to be an affiliate of BCCI’s — was not
included in the deal, yet the prosecutors did not pursue that company. Capcom was
apparently ignored by the Justice Department for a year and a half, when it was named as
a defendant in a federal indictment announced on September 5, 1991. Justice Department
officials maintain that British Customs had agreed to take responsibility for following up
on Capcom.

FALSE PROFITS

350 )

Middle District of Florida, and that office only with respect to further
prosecution of the convicted BCCI subsidiaries based on information
known to the U.S. attorney’s office at the time.”

That may have been how the agreement was worded, but the Justice
Department nonetheless failed to follow up other leads for several
months. For example, Dexter Lehtinen, who served as acting U.S.
attorney in Miami until January 1992, told the Kerry Committee that
when he tried to pursue BCCI in 1990 in connection with other alleged
crimes, his superiors in Washington told him that he could not do so —
because of that clause in the plea bargain. Lehtinen wanted to prose¬
cute both BCCI and Munther Bilbeisi for coffee smuggling and other
offenses. In August 1991 — after the BCCI affair became an interna¬
tional scandal — Lehtinen was allowed to indict Bilbeisi along with his
accountant. By that time, the statute of limitations for some of the
most serious alleged offenses — including coffee smuggling — had
passed, and Lehtinen was only able to charge the Jordanian (and his
accountant) with tax fraud. By that time, of course, Bilbeisi was en¬
sconced in Jordan, thumbing his nose at U.S. law enforcement.

The federal authorities’ conduct was the target not only of criticism
but of ridicule. One editorial cartoonist depicted the Justice Depart¬
ment as a band of policemen ready to charge into BCCI’s headquar¬
ters with their guns drawn in order to arrest the criminals inside. But
the building was gutted, the vault was empty, and all the culprits had
fled.

One man who took much of the blame was Attorney General Richard
Thornburgh, who ran the department until August 1991, when he
resigned to run for the U.S. Senate in Pennsylvania in a special election
occasioned by the death of the Republican John Heinz. James Carville,
the campaign manager for the Democratic candidate, Harris Wofford,
used the BCCI affair as a weapon against Thornburgh, and Wofford
was elected. (Carville went on to manage the 1992 presidential cam¬
paign of Governor Bill Clinton of Arkansas.)

William P. Barr was named acting attorney general on Thornburgh’s
resignation, and soon after, President Bush appointed him to the post.
On the eve of Barr’s Senate confirmation hearing in November, a
Justice Department spokesman said, “There’ve basically been three
rules: aggressively pursue, spare no expense, and follow evidence
wherever it leads.” On November 12, Barr promised the Senate Judi¬
ciary Committee that he would do everything in his power to investi¬
gate BCCI and bring any miscreants to justice.

The Watchdogs ( 351

Just three days later, the Justice Department announced a new in¬
dictment, accusing BCCI, Abedi, Naqvi, and Pharaon of engaging in a
racketeering conspiracy involving BCCI’s illegal ownership of Inde¬
pendence Bank and 25 percent of CenTrust Savings Bank. The indict¬
ment also charged them with stock fraud because of the scheme to
park CenTrust junk bonds at BCCI. That same day, the Senate Judi¬
ciary Committee voted unanimously to recommend Barr’s confirma¬
tion; he was confirmed by the full Senate on November 20.

The November indictment certainly seemed to be a positive sign, but
Justice was still playing catchup with Morgenthau. The federal prose¬
cutors had yet to match the sweeping New York State indictment
accusing BCCI of a multibillion-dollar fraud against its depositors.
Moreover, there were indications that Justice was not nearly as aggres¬
sive as Barr had promised it would be. Important leads were still not
followed, documents were not seized, potential witnesses were not
interviewed. In late 1991, for example, a journalist telephoned several
people who had been employed in BCCI’s mysterious Washington
representative office to find out what BCCI had been up to in the
capital. Several of them were willing to talk to the reporter. When he
asked if they had been approached by federal agents or prosecutors,
they all said no. Around the same time, the reporter asked Pakistan’s
ambassador to Washington, Abida Hussain, about U.S. efforts to
bring Abedi to justice. She insisted that no one from the federal gov¬
ernment had mentioned to her any request for Abedi’s extradition to
the United States."'

Law enforcement authorities were not the only watchdogs criticized
for their handling of BCCI. Bank regulators were also on the defensive.
The BCCI affair was, after all, the biggest and most spectacular bank¬
ing scandal of all time. BCCI insiders and their allies stole billions of
dollars from depositors; secretly bought banks and companies in the
United States, Britain, and other countries; laundered millions of dol¬
lars for drug traffickers and other criminals; and assisted in — or
perpetrated — a vast array of other crimes. Throughout, bank regula¬
tors seemed to be largely oblivious.

It is particularly striking that this rampage occurred almost literally
under the noses of two of the world’s leading central banks. BCCI’s

*In 1992, however, the Justice Department, working through the State Department, did
apply for Abedi’s extradition on behalf of the Manhattan district attorney’s office and the
U.S. attorney in Washington, D.C.

FALSE PROFITS

352. )

headquarters was just around the corner from the Bank of England.
First American Bankshares’ head office is a few blocks from the Fed¬
eral Reserve.

The U.S. central bank allowed a group of BCCI’s clients to buy First
American in spite of a vast number of clues that they were front men
for BCCI, as we have seen. In the fall of 1991, a congressional investi¬
gator discovered yet another clue that the Fed had overlooked. Kidder
Peabody & Company, the Wall Street firm that assisted in the takeover,
had registered with the Justice Department as a foreign agent. In a
series of disclosure statements filed from 1978 to 1981, Kidder stated
that its clients included BCCI, Abedi, and three dummy companies.
There was no reference to the Arab investors who were supposedly
buying the company!

After the takeover, the Fed and other U.S. regulators failed to de¬
tect — or ignored — several signs of the close ties between BCCI and
First American. For example, the Fed was informed that Clifford and
Altman had bought stock in First American, but years went by before
regulators asked if the stock had been purchased with loans from
BCCI. (Regulators were also oblivious of BCCFs quite open ties to
NBG — including the fact that BCCI brochures were distributed to
NBG customers.)

While the Fed was apparently in the dark, Robert Mazur of Cus¬
toms stumbled on information about the true ownership of First
American. When this information was passed on to the Fed in late
1988, there was hardly any follow-up. Similar information from other
sources was brushed aside for two more years.

One of the strongest critics of the regulators was Henry Gonzalez
of the House Banking Committee. He expressed astonishment that
for so many years the Fed had been unaware that BCCI owned First
American. The Federal Reserve, he said, “would have us believe that
BCCI was a stealth banking operation, undetected on the regula¬
tors’ radar screens.” He then pointed out that criminals might well be
the owners of other American banks without the regulators’ knowl¬
edge. “If U.S. banks can so easily be invaded by foreign operators
and if the takeovers can be kept secret so successfully, what protec¬
tion exists in our banking system? What other foreign entities, or
criminal elements, are secretly in control of U.S. banks at this very
moment?”

On September 13 — a Friday, as it happened — the House Bank¬
ing Committee questioned several Fed officials, including the general

The Watchdogs ( 353

counsel, a nervous J. Virgil Mattingly, Jr., and the New York Fed’s
gravelly voiced president, E. Gerald Corrigan. The legislators wanted
to know how BCCI might have used First American to influence
important people in Washington. Mattingly responded that the Fed
was investigating loans from First American to some former public
officials in Washington. Fie noted that there was nothing necessarily
wrong with such loans, since First American was, after all, a leading
local bank. The Fed’s counsel declined to provide any details of who,
or what, the central bank was looking into.

Mattingly and his colleagues seemed confused and defensive when
asked about their supervision of BCCI and the four U.S. financial
institutions in which it had secretly acquired stock: First American,
National Bank of Georgia, Independence Bank, and CenTrust. In an
apparent attempt to shift some of the blame, the Fed officials alleged
that the Bank of England had kept them in the dark about the
huge loans that BCCI had made to finance the acquisition of First
American. But Corrigan, toward the end of the September 13 hear¬
ing, slipped in the startling information that in the fall of 1989, a
Bank of England official — the chairman of the College of Super¬
visors set up to monitor BCCI — told a Fed official that there were
such loans and had even “asked if he could provide further informa¬
tion.”

Unfortunately, no one on the committee seemed to recognize
the importance of this disclosure. Corrigan was admitting that the
Fed had been told in 1989 that BCCI had financed First Ameri¬
can’s shareholders on a large scale and that the Fed had effectively
replied, “We don’t want to know.” It was a staggering admission
of negligence. (It also completely undercut the Fed’s earlier criticism
of the Bank of England for not passing on such information.) It was
not until December 1990 — after strong evidence was provided
by Morgenthau and the College of Supervisors — that the Fed took
serious steps to check out the allegations it had been hearing for two
years.

In the wake of the Gonzalez hearing, the Federal Reserve — like the
Justice Department — seemed eager to prove that it was now doing its
job. On September 17, the Fed announced that it intended to fine
Ghaith Pharaon $17 million for his role in the acquisition of Indepen¬
dence Bank. Acting on the Fed’s behalf, the U.S. attorney in Manhat¬
tan obtained a court order freezing Pharaon’s considerable U.S. as-

FALSE PROFITS

354 )

sets."' On September 25, the Fed sought to impose a $20 million fine on
Kemal Shoaib, the BCCI executive who had served as chairman of
Independence until 1989. (Around this time, board members of the
California bank filed a federal racketeering suit against Pharaon and
Shoaib.)

At the time of the Fed’s actions, Independence was in disastrous
shape. It had already been weak when BCCI secretly acquired it in
1985; it was now virtually insolvent. By the end of September, its
capital had dwindled to just $5.5 million, less than 1 percent of total
assets. Some regulators wanted to use $35 million of BCCI’s deposits
in California to shore up the bank, but the scheme was vetoed by some
of their colleagues. The bank was soon declared insolvent and taken
over by the Federal Deposit Insurance Corporation in January 1992.

The Federal Reserve’s aggressiveness in the summer and fall of 1991
could in no way make up for its incredible inaction in previous years.
How could this possibly be explained? In defending their conduct, Fed
officials have stressed repeatedly that BCCI was never licensed to
collect retail deposits in the United States. Its state-licensed agencies in
Florida, New York, and California were allowed to accept funds only
from nonresidents, and those deposits were not covered by federal
deposit insurance. That may have been the law, but it was flouted by
BCCI — even after scrutiny of the bank was increased following the
C-Chase indictment. From 1987 to 1990, BCCI conducted an illegal
telemarketing program in the United States to collect deposits, and
much of the money came from U.S. residents.

As far as First American was concerned, Fed officials denied that
they had grounds for suspecting that the BCCI clients who took over
the company were front men. Mattingly told Gonzalez’s committee
that “the Fed is not authorized to deny an application on suspicion or
rumor, or even because it wants to. Under the law, we must have

*The prosecutor who filed the motion, Assistant U.S. Attorney Thomas Zaccaro, said
that Pharaon had planned to sell his American Southern Insurance Company to Vista
Resources for $3 5 million on September 18. The previous May, he had apparently sold his
80 percent stake in DLF Inc., which traded in the bank debt of Eastern European and Latin
American companies.

In both deals, the buyers had interesting backgrounds. Vista Resources was controlled
by the Georgia tycoon J. B. Fuqua. One of Pharaon’s key lieutenants in the United States,
Dooley Culbertson, used to work for Fuqua. (It is also worth noting that Fuqua was a
prominent political supporter of BCCI’s old friend Jimmy Carter.)

DLF was taken over by three former executives of Manufacturers Hanover Trust
Company, which had been a major creditor of Pharaon’s Saudi company, REDEC. One of
the executives, Fulvio Dobrich, served as chairman of Independence Bank from 1989 until
1992.

The Watchdogs ( 355

evidence. The Fed had no grounds for denial and therefore gave its
approval in August 1981.”

The Fed tried hard to promote the idea that it did not have sufficient
powers to police foreign banks in the United States. At the regulators’
urging, Congress quickly enacted legislation giving it additional au¬
thority. The Fed can now review the establishment of any branch,
agency, or commercial lending company by a foreign bank. It can also
close foreign bank offices for a violation of the law or for unsound
banking practices. Foreign banks are also required to report any loan
secured by 25 percent or more of a U.S. bank’s shares. But was the new
legislation really needed? Sidney Bailey, the chief bank regulator in
Virginia — and the only regulator who had opposed the takeover of
First American — argued that the Fed already had the authority to
block the acquisition in the early 1980s.

Rather than focusing on new laws, it would make sense for bank
regulators in the United States and elsewhere to concentrate on chang¬
ing their own practices and attitudes. Regulators in different countries
took far too long to exchange information on BCCI. Many of the
regulators also seem to have been terribly naive and gullible, incapable
of imagining that a bank could be run by criminals.

The European regulators were just as blind as the Americans, in spite
of having been warned of the dangers of allowing an international
bank to fall between the regulatory cracks. Nearly a decade before
BCCI was seized, the international financial world was shaken by a
major banking scandal: the collapse of Italy’s Banco Ambrosiano. In
several ways it was a precursor of the BCCI affair. The chairman,
Roberto Calvi, had committed massive frauds using banks he con¬
trolled through a Luxembourg holding company. When Ambrosiano
crashed in 1982, it became clear that the Bank of Italy had little idea of
what Calvi did outside Italy. The Institut Monetaire Luxembourgeois
(IML) knew absolutely nothing because the Luxembourg holding
company had not been licensed as a bank.

After that debacle, bank regulators took steps to coordinate the
supervision of international banks. In spite of these reforms, BCCI
remained a weakly regulated institution. No single regulator had a
complete overview of its activities, and BCCI exploited these blind
spots to the fullest. Abedi and his minions shifted loans and deposits
from one corporate entity to another in a massive shell game.

Problems could have been averted if the regulators had exchanged
information, but this was not done for years. One notable example

FALSE PROFITS

35^ )

concerns the report on BCCI prepared in 1978 by Joseph Vaez of the
Office of the Comptroller of the Currency. Vaez, as we have seen,
found that BCCI was in an extremely precarious financial condition,
yet there is no indication that his report was passed on to the European
regulators with primary responsibility for the bank. Of course, there is
no reason that the Bank of England or the IML could not have uncov¬
ered this same information by conducting a similar inquiry. Had they
done so, they could have forced BCCI to strengthen its balance sheet,
sparing untold suffering to depositors in the 1990s.

It was not until 1988 that BCCI’s regulators took serious steps to
coordinate regulation by forming the College of Supervisors. But the
Federal Reserve did not become a member, and it only began sending
observers in 1991. While the Fed was absent, the other regulators
discussed BCCFs huge loans to First American’s stockholders — the
“smoking gun” that later exposed many of these investors as front
men.

After BCCI was shut down in July 1991, the Bank of England was
sharply criticized by British politicians. At a hearing that month, Alan
Beith, a Liberal Democrat member of Parliament, blasted Governor
Robin Leigh-Pemberton. “Here was a bank,” he said, “that had been
convicted as a corporate body of money laundering. Here was a bank
about which you knew, or had been told, that there were transactions
which were false or deceitful, which you had been told about in April
1990 . . . yet a lot of people, some in public service, others in small
businesses, continued to believe the bank enjoyed a clean bill of health
from the Bank of England.”

In the face of such attacks, Bank of England officials have insisted
that it is not their job to detect crime. If people go out of their way to
deceive the regulators, it is hard to find out the truth. “I really believe it
is asking a lot of [auditors] or of supervisors necessarily to uncover
deliberate and well-designed fraud,” Leigh-Pemberton told the parlia¬
mentary panel. “The operation of a bank within a bank, the holding of
files, which, as it were, were locked away and not shown to auditors in
the normal audit seems to me to be a form of deception against which
it is extremely difficult to guard and uncover.”

In a similar vein, Pierre Jaans, the head of the IML, said that bank
regulators should not be expected to play detective. “I was aware of
rumors for years,” he said, but “I was never able to find hard evi¬
dence.” He added that if he had tried to withdraw BCCI’s Luxem¬
bourg banking license, he probably would have lost in court.

When the Bank of England was accused of negligence, officials

The Watchdogs ( 357

claimed that they did not have convincing evidence of fraud until early
1991. The Price Waterhouse reports from previous years, one central
banker said, were mainly technical. “It was seen to be a bad bank but
not a crooked bank,” one official said. There are some at the Bank of
England who now concede that they might have moved more swiftly
to investigate BCCI. But, claims a senior official, this might have saved
months, but certainly not years, in the time it took to unravel the fraud.

After BCCI was finally shut down, Leigh-Pemberton said the regula¬
tors acted because they had discovered that the bank had a “criminal
culture.” This, of course, ignores the substantial evidence of criminal¬
ity that had emerged over the previous two and a half years as a result
of the Tampa indictment. Leigh-Pemberton tried hard to downplay the
importance of that case. In parliamentary testimony, he said, “There
was no evidence that group level management was implicated or,
except for two junior officers, [that] anyone in the UK management
team was implicated.” This statement is hard to accept. Shortly after
the indictment, the prosecutor, Mark Jackowski, said in bond hearings
that some of BCCI’s bankers had told an undercover agent that their
superiors were aware of the money laundering. In addition, the April
1989 superseding indictment stated explicitly that money laundering
was part of BCCI’s “corporate strategy.” When BCCI pleaded guilty in
January 1990, the Bank of England would have been fully justified in
throwing it out of the country. An eloquent appeal to do so was made
by an investigative reporter, Michael Gillard of the London Observer ;
five days after the plea bargain was announced.

Under the Banking Act of 1987, the Bank of England can revoke or
restrict a bank’s authorization if it does not “conduct its business in
a prudent manner.” One of the key criteria is “whether the in¬
stitution’s business is carried on with integrity.” The Bank’s defini¬
tion of integrity requires a bank to observe “high ethical standards
in carrying on its business,” declares its Statement of Principles
regarding the powers to give or revoke authorization. “Criminal
offences or other breaches of statute will obviously call into question
the fulfilment of this criterion,” the Bank warns.

It is difficult to see how the required “high ethical standards” fit
with BCCI pleading guilty to conspiring with its own officials and
two representatives of Colombia’s Medellin Cartel to commit tax
fraud and launder the proceeds of cocaine sales or to launder some
$14 million on behalf of the cartel.

The Bank of England did not revoke BCCI’s license but allowed the
bank to continue collecting deposits in Britain, even as evidence of

FALSE PROFITS

358 )

BCCI’s “criminal culture” mounted. By the end of 1990 and the begin¬
ning of 1991, bank regulators had overwhelming evidence of BCCI’s
criminality. Even then, regulators in Britain and other countries
dragged their feet about shutting down the bank.

The conduct of the bank regulators in the BCCI affair is not simply
a matter of ineptitude. In some cases, BCCI had very cozy relationships
with people responsible for supervising it. Some were lavishly enter¬
tained, others were given valuable gifts and expense-paid trips. Several
bank regulators have been accused of taking bribes.

In the United States, BCCI had its biggest (overt) presence in Florida,
which happens to be the only state where the chief bank regulator
is elected to the post. Since the mid-1970s, that job has been held
by Gerald Lewis, whose title is state comptroller. Lewis has acknowl¬
edged that BCCI offered him favors: the use of a car and driver and
free lodging at a posh condominium in Miami. “I politely declined,”
he said. But he did fly on a corporate jet owned by CenTrust. Lewis’s
1986 reelection campaign, according to a press report, “reimburse^]
CenTrust $1,506 for the airfare — exactly one day after receiving
a $1,600 contribution from [Chairman David] Paul’s bank subsidiary,
CenTrust Finance Corp.” As things turned out, Lewis proved to be one
of the few regulators willing to take tough action against BCCI — even
after he received a strange letter from a Justice Department official,
Charles Saphos, asking him to allow BCCI to remain in business. In
March 1990, Lewis refused to renew BCCI’s license.

One curious transaction with a former state bank regulator oc¬
curred shortly after the First American takeover. The acquisition had
to be approved by the New York State Banking Board, a panel that
advises the state banking department on regulatory and legal matters.
When the board took its first vote in November 1981, the takeover
was rejected. In a vote four months later, the measure was approved.
One of the votes switched was that of Muriel Siebert, the state banking
superintendent. One condition attached to New York’s approval was
that First American would sell Bank of Commerce, a New York bank
it controlled. The bank was disposed of with the assistance of none
other than Muriel Siebert, who had just returned to the private sector.
Siebert says she received a fee of “$50,000 or $100,000” for helping to
find a buyer. She says this had nothing to do with her former role as a
regulator.

On the federal level, several regulators wound up working for law
firms with ties to First American. The Washington lawyer Baldwin

The Watchdogs ( 359

Tuttle worked in the Fed’s general counsel’s office until 1977, when he
joined Kutak, Rock & Huie; he later joined Milbank, Tweed, Hadley
& McCloy. Tuttle was an important member of the legal team led by
Clifford that persuaded the Fed to permit BCCI’s clients to take over
First American. After the takeover was approved, he assisted Clifford
and Altman in their representation of First American and BCCI. In his
dealings with the Fed, Tuttle was, of course, negotiating with old
colleagues, including one of his former bosses, the deputy general
counsel Robert Mannion. It was Mannion who presided over the April
1981 hearing on the proposed takeover. In 1983, Mannion joined the
Washington law firm of Arnold & Porter, which has done important
work for First American and was also retained by BCCI after the
Tampa indictment. Mannion has said he hasn’t been directly involved
in that work.

Perhaps the most intriguing job change was that of Robert Bench, a
former associate deputy comptroller of the currency. It was at his
request that Joseph Vaez prepared the report on BCCI in early 1978.
This extraordinarily prescient document showed that BCCI had en¬
gaged in extremely reckless banking practices and could well be insol¬
vent. In 1986, Bench was sent a copy of a CIA report on BCCI
containing serious allegations of wrongdoing. (Bench, as we shall see,
apparently suffered a bout of amnesia when asked about this report at
a congressional hearing.) In 1988, Bench left the government to join
Price Waterhouse. He consulted extensively for BCCI in 1988, 1989,
and 1990. Curiously, Bench’s arrival seems to have had little effect on
Price Waterhouse’s attitude toward BCCI.

The BCCI network even had a friend at the very top of the Fed¬
eral Reserve. In January 1991, the Fed took its first serious discipli¬
nary action against BCCI and First American: it issued cease and desist
orders against both banks, requiring them to sever whatever connec¬
tions they had with each other. Before the orders could be issued,
they had to be voted on by the Federal Reserve Board. The only
member “abstaining from this action,” according to the minutes of the
meeting, was the chairman, Alan Greenspan. He later explained that
he had socialized “on several informal occasions” with Robert Alt¬
man.

Outside the United States, BCCI developed extremely close ties with a
number of regulators, particularly in the Third World. In Pakistan
alone, the bank hired a long list of bank regulators — either as employ¬
ees or consultants. Examples included two former central bank gover-

FALSE PROFITS

36 O )

nors, Rashid Ahmed and Iqbaluddin Ahmed. BCCI also recruited
Naziruddin Ahmed, a former executive director of the State Bank of
Pakistan, and two former chairmen of the Pakistan Banking Council,
Ali Pirbhai and Mushtaq Yousufi.

BCCI also paid bribes to regulators, according to several sources.
Alvin Rice, a former vice chairman of Bank of America who was
involved in monitoring its investment in BCCI, has said that the bank
thought nothing of making payoffs. As he put it, bank officials thought
they could get around regulators by giving out “baksheesh.” Robert
Morgenthau found evidence of bribes to central bankers during the
course of his investigation. In July 1991, as we have seen, he accused
officials of Peru’s central bank of taking $3 million in payoffs from
BCCI. One year later, he would allege that BCCI made similar pay¬
ments to central bankers or other financial officials in another eleven
developing countries.

Akbar Bilgrami, one of the bankers convicted in Operation C-
Chase, has described a payoff to an African central banker. In about
1980, said Bilgrami, Swaleh Naqvi asked him to take a senior official
from Sudan’s central bank on a shopping spree at Harrods in London.
BCCI paid the bill — about £78,000 (well over $100,000). In return,
the official was asked to place several million dollars of his country’s
foreign exchange reserves in BCCI.

BCCI’s efforts to ingratiate itself with bank regulators were not
confined to the Third World. In Britain, the bank is alleged to have
lavished gifts on a Bank of England official. It was well known within
BCCI that Abedi had given the official presents of Persian rugs, alleged
Javangher Masud, who worked both for the Abu Dhabi Investment
Authority and for one of the sheikhs who was a shareholder in BCCI.
No proof has ever come out.

Robin Leigh-Pemberton, the governor since 1983, has not been
accused of any wrongdoing, but he came to the Bank of England from
an institution that had very close ties to BCCI, National Westminster,
one of Britain’s “big four” banks. NatWest acted as BCCI’s clearing
bank in London, which meant that it handled a huge volume of trans¬
actions for BCCI.

After the July 1991 shutdown, Abedi granted a few interviews to
reporters. He was feeble and his mind was not very clear, but he
recalled some of the friends who had helped him over the years. He
spoke of politicians like Jimmy Carter and Lord Callaghan but also
referred to British financial institutions: “They were all helpful, the

The Watchdogs ( 361

Bank of England, NatWest, they all helped, and if I go to them again
they will again be helpful.”

To a certain extent, criticism of the conduct of law enforcement agen¬
cies and central banks is misplaced. These agencies may be staffed by
civil servants, but the people who run them are chosen by politicians.
In the United States, that means the president. The Federal Reserve
chairmen, attorneys general, and other top officials whose handling of
BCCI has been criticized were all chosen by Carter, Reagan, or Bush. It
thus seems reasonable to ask whether political influence helps to ex¬
plain the conduct of the watchdogs. After all, BCCI was for years
protected and defended by friends in high places.

The Reagan-Bush Justice Department certainly seems to have been
vulnerable to lobbyists. Richard Thornburgh, the former attorney
general, often talked tough about crime, but he seemed to have a blind
spot when it came to white-collar crooks, including savings and loan
bandits and money-laundering bankers. In March 1990 — two
months after the Tampa plea bargain was announced — Thornburgh
“withdrew the Justice Department’s longstanding support for tough
mandatory sentences for corporate criminals,” the Washington Post
reported. Thornburgh switched his position “following an intense
lobbying campaign by defense contractors, oil companies and other
Fortune 500 firms, according to administration officials and depart¬
ment correspondence.”

In August 1991, Jack Blum appeared as a witness before the Kerry
Committee and spoke of how BCCI had employed well-connected
lawyers and lobbyists after the C-Chase indictment to squelch investi¬
gations of the bank. There was “an army of people working in Wash¬
ington on all sides trying to say this bank was a wonderful bank, the
people involved in it were honest, good, and true people, and that
anybody who said they were the criminals that I was making them out
to be had to be crazy.”

Shortly after Blum made these remarks, another Washington insider
enlisted in that army, a young lawyer who had been employed in a
sensitive position in the White House. He would now be working for
one of the prime culprits in the BCCI affair.

The Politicians

Ed Rogers was on a plane to Jiddah, Saudi Arabia, savoring
the comforts of life in the private sector. It was August 31, 1991, just
over three weeks after the ambitious young lawyer had left the White
House and his job as political director for President Bush’s chief of
staff, John Sununu. The thirty-three-year-old Rogers and his old friend
and new law partner Haley Barbour — a former Reagan White House
official — were planning to cash in their government experience. Their
mission: to negotiate a fat contract to represent Kamal Adham, the
BCCI front man. American and British prosecutors were building
strong criminal cases against the Saudi sheikh, and he wanted to cut an
advantageous deal.

Rogers would later explain to congressional investigators how he
and Barbour marketed themselves to clients. Their particular exper¬
tise, he said, was “managing other people’s affairs, managing other
people’s problems, managing other people’s business.” In Adham’s
case, there was “an organizational problem,” because the Saudi busi¬
nessman had “a large business concern that needed a lot of different
kinds of representation.” Rogers intimated that the organizational
difficulty he was managing for Adham was “the sheikh’s problems
with the feds.”

After Rogers and Barbour spent three days talking with Adham and
his legal and financial advisers, they struck a deal. The sheikh would
pay Rogers $600,000 to represent him for two years. Shortly after
returning home, Rogers received a check for $136,000 as a down
payment on his contract. Once he had the money, he registered with
the Justice Department as a foreign agent, saying that his work on
behalf of the sheikh might “border on the political.”

( 361 )

The Politicians

( 363

In late September and October, Rogers returned to the Middle East
for meetings with Adham and the sheikh’s advisers. On the latter trip,
Rogers twice ran into Assistant U.S. Attorney David Eisenberg, who
had come to Jiddah from Washington to hear Adham’s version of his
dealings with BCCI. Both Rogers and the Justice Department maintain
that these were but fleeting encounters.

While Rogers was in Jiddah in October, news of his work for Adham
broke in the United States and in the international media. The sheikh’s
hiring of a political operative who had so recently left the Bush admin¬
istration and who had virtually no legal experience provoked an up¬
roar. Rogers’s involvement underlined to the public how BCCI and its
backers routinely tried to buy influence to get around obstacles. In the
New York Times , William Safire lambasted Rogers as “a Sununu
toady” who was helping “an oil-backed elite.”

The Bush administration lost no time in criticizing Rogers’s con¬
tract. On October 25, at a White House press conference, President
Bush said that he didn’t know what Ed Rogers “is selling.” Not long
after that, Rogers said that he had canceled the contract.

It is heartening that Bush would distance himself from the Adham-
Rogers deal, but it is also somewhat inconsistent. BCCI and its allies
had an extraordinary number of connections to associates of President
Bush, including financial supporters, top administration officials, and
members of his immediate family. There may even have been a connec¬
tion to the president himself. During the same press conference, Bush
said he didn’t “know anything about the man,” without making it
clear whether he was referring to Rogers or Adham. Bush had sat in
numerous meetings attended by Rogers, according to Rogers’s own
testimony to congressional investigators. As for Adham, Bush was
head of the CIA when Adham ran Saudi intelligence, and the two
agencies worked closely together.

Weeks after the press conference, Adham spoke about his relationship
with Bush in an interview in Cairo with the Middle East News Network.
“There was a period of overlap,” he said, referring to their respective
jobs. “But whatever the case, it isn’t possible for a president to say that.”
Referring to the press conference, Adham added, “The next day, nobody
mentioned the White House spokesman came out and said that the
president knows Mr. Adham and he did not like what was written in the
papers.” (The White House denies that Bush knows Adham.)*

^Through his lawyer, Adham says Bush did not know him personally but that Bush
most likely would have known of him.

FALSE PROFITS

3^4 )

Senator Kerry’s staff conducted an investigation of Rogers’s involve¬
ment with Adham but came to no firm conclusions about how he had
ended up working for the sheikh. When Kerry’s staff members asked
Rogers who had steered him to Adham, he maintained that the sugges¬
tion came from Samir Darwisch, the general manager of Washington’s
Grand Hotel, in the summer of 1991, a version of events that the
investigators eventually judged “shallow and unconvincing.” During
an apparent misunderstanding in one interview, Rogers seemed to
imply that he had met with a representative of Adham’s in March
1991, though he then quickly denied it. The investigators have specu¬
lated that Rogers may indeed have started to negotiate much earlier
than he now admits, and might well have had such a meeting in March
1991 — five months before he left the White House. Rogers insists that
he never heard of Adham when he worked at the White House, add¬
ing, “There’s no evidence that I did anything wrong.”

Certainly, Rogers admitted meeting an intriguing assortment of
characters as he made his overtures to Adham. These included the
Saudi arms dealer Adnan Khashoggi; Sam Bamieh, a big Bush cam¬
paign contributor with ties to Khashoggi and Adham; and Sandra
Charles, a former aide to Frank Carlucci. (Carlucci served in the
Reagan administration as deputy secretary of defense and national
security adviser. Under Carter, he was deputy director of the CIA.)
Rogers admitted discussing Adham with Charles and Bamieh but de¬
nied talking about him with Khashoggi.

The Rogers incident for the first time focused attention on the role of
the White House in the BCCI affair, and especially on President Bush.
BCCI’s connections to associates of Bush fueled public suspicion that
political influence may help to explain the administration’s astonish¬
ingly slipshod handling of the entire scandal.

There were tantalizing signs that seemed to indicate that the presi¬
dent knew more about the bank than he was prepared to admit. Over
the years, his own career had at times taken him very close to BCCI
and its backers in Saudi Arabia.

During Bush’s tenure as CIA director, the agency was allegedly
involved in a very curious business deal with James R. Bath, a Texas
businessman who is a friend and sometime financial backer of one of
Bush’s sons. Bath was also a business associate of Khalid Bin Mahfouz,
an important BCCI insider.

For years, the CIA secretly owned several airline companies — “pro¬
prietaries” in agency jargon. The most famous of these was Air Amer-

The Politicians

( 3^5

ica, which ferried CIA agents around Southeast Asia during the Viet¬
nam War. After the CIA scandals of the 1970s, the agency was obliged
to dispose of much of its fleet, and in 1976 it sold several planes to
Skyway, a firm managed by Bath, according to Bill White, a former
business partner of his. Bath denies any CIA involvement in the deal.
White, who has been in bitter litigation with Bath for years, also
says that Skyway was owned by Saudi interests, including Bin Mah-
fouz. Later, as we shall see, Bath provided financing to George W.
Bush, the future president’s eldest son, when he went into the oil
business.

Returning to the private sector in early 1977, Bush became chair¬
man of the executive committee of the First International Bank of
Houston. He traveled on the bank’s behalf and sometimes marketed to
international banks in London, including several Middle Eastern insti¬
tutions. Some speculate that he met with BCCI officers at this time.

When Bush ran for president a decade later, several people con¬
nected with BCCI offered to help. One intriguing example is Moham¬
med Rahim Motaghi Irvani, an Iranian immigrant with multiple ties to
BCCI, as noted in Chapter 6. In 1987, Irvani wrote to James A. Baker
III, Bush’s campaign manager, saying he would like to help in the race.
The letter was forwarded to Baker by former CIA director Richard
Helms, with a note describing Irvani as “a man of substance and
decency.”

One important Bush supporter was Jackson Stephens, the Arkansas
investment banker. Stephens, of course, had played a crucial role in
BCCI’s penetration of the U.S. market by collecting First American
stock for Abedi’s supposed clients. Stephens’s wife, Mary Anne (they
have since been divorced), ran Bush’s 1988 campaign in Arkansas. In
that campaign, Stephens was a member of Team 100 — individuals
who had given $100,000 to the party. In May 1991, his brokerage
firm, Stephens Inc., kicked in $100,000 to a Bush dinner committee.

As regulators, journalists, and prosecutors probed the failed bank in
the fall of 1991, they found that Stephens and some of his associates
had retained their connections with the BCCI network long after the
First American takeover. Stephens has tried hard to convey the idea
that he played a peripheral role in the events leading up to the First
American takeover battle and that, in any event, his involvement with
BCCI ended a long time ago. In fact, close associates of Stephens’s have
been involved in the BCCI saga during the 1990s. After BCCI was
seized, the banking authorities in Hong Kong tried to find a buyer for
Bank of Credit and Commerce (Hong Kong) Ltd. Through the end of

FALSE PROFITS

366 )

1991, it seemed likely that Indonesia’s Lippo Group would take over
the bank, paying out as much as forty cents on the dollar. (The plan
was scuttled in February 1992, when Hong Kong investigators discov¬
ered previously unrecorded claims of $145 million against the bank.)
Lippo is run by Mochtar and James Riady, financiers and associates of
the Indonesian president, Suharto. The Riadys are very close to Ste¬
phens: together they controlled Stephens’s Worthen Bank of Little
Rock, Arkansas; one of them even lived in Little Rock for a few years.

Also in Bush’s Team 100 was the California real estate investor Sam
Bamieh, who was, of course, one of the people with whom Ed Rogers
discussed working for Adham. A Palestinian American, Bamieh has
developed strong ties to the Republican party in recent years. Rogers
explained to congressional investigators in 1992 that he met Bamieh in
1988 through their mutual friend the late Lee Atwater, who helped to
mastermind Bush’s victory in 1988 and then became chairman of the
Republican National Committee.*

After Bush took office in January 1989, he recruited a number of
people with ties to BCCI associates. Two of his most important foreign
policy advisers were Brent Scowcroft, the national security adviser,
and Lawrence S. Eagleburger, the deputy secretary of state (and, since
August 1992, acting secretary of state). Both men, as we have seen,
had come from Kissinger Associates, which also employed a BCCI
front man as a consultant (the former Brazilian diplomat Sergio
Correa da Costa) and which provided advice to BCCI after the Tampa
indictment. While serving as head of the National Security Council,
Scowcroft has done business in Pakistan, where the government is
headed by a BCCI ally, Prime Minister Nawaz Sharif.

Scowcroft was also an important shareholder in the now-defunct
National Bank of Washington (NBW), as were several other people
with intriguing connections. A major shareholder in the bank was the
Saudi investor Wafic Said, who is close to the kingdom’s defense minis¬
ter, Prince Sultan. A board member of Said’s holding company and
NBW was the banker Robert Abboud, who had ties to the Bin Mahfouz
family. A large chunk of NBW stock was owned by partners in Paul
Laxalt’s law firm, which represented BCCI in the Tampa case. NBW’s
directors had included Thomas Hale (“Tommy”) Boggs, Jr., whose law
firm, Patton, Boggs & Blow, would later represent Sheikh Zayed and
BCCI. (Back in the 1970s, Clifford had been on the board of NBW.)

* Bamieh also had ties to the Democrats. In the late 1970s he paid for a trip to the Middle
East by Ruth Carter Stapleton, President Carter’s sister.

The Politicians

( 3^7

Several Bush Cabinet members and White House aides socialized
with Robert Altman and his wife. In the fall of 1990, the Altmans held
a surprise birthday party at their Potomac, Maryland, home for Mi¬
chael Boskin, chairman of the President’s Council of Economic Advis¬
ers. Several of Boskin’s friends lined up in the mansion’s huge atrium
wearing Groucho Marx masks to lampoon the economist’s prominent
nose, eyebrows, and spectacles. The guests included Secretary of Com¬
merce Robert Mosbacher, White House Chief of Staff John Sununu,
and Jack Kemp, the secretary of housing and urban development. *

Altman was particularly close to Mosbacher and Samuel Skinner,
who served as transportation secretary and then as White House chief
of staff. Lynda Carter, Altman’s wife, socialized with their wives,
Georgette Mosbacher and Honey Skinner. Mosbacher, an oil tycoon
from Texas, had raised large amounts of money for Bush’s 1988
presidential run before taking over the Commerce Department. In
1991, he left that post to become director of Bush’s reelection cam¬
paign. When he served in the cabinet, he talked to Altman at least
every couple of weeks, according to an aide; he once left Scowcroft on
hold in the middle of a conversation as he chatted with Altman on
another line.

One Bush administration official who pops up in the story is Nicho¬
las Brady, the treasury secretary. A confidant of the president’s, Brady
has spent most of his career as an investment banker with Dillon, Read
in New York. An important client in the 1970s was Sonatrach,
Algeria’s government-owned oil company. During the same period,
Clark Clifford was a foreign agent for the Algerians, and one of his
duties was assisting Sonatrach in its foreign borrowing.

Another Dillon, Read client at that time was General George Olm¬
sted, who controlled First American. When the Federal Reserve forced
Olmsted to dispose of his stock, he was advised by Brady’s firm. In
1977, he sold a controlling stake in the company to the Middendorf
group, which included Peter Flanigan, a managing director of Dillon,
Read. In other words, Dillon, Read officials were on both sides of the
transaction.!

*When the BCCI scandal blew up in 1991, Boskin tried to distance himself from Altman.
He admitted, through a spokesman, that the two families had twice vacationed in Colorado,
but said they “skied on different mountains.”

fDillon, Read also had a Saudi connection. In 1981, the firm was acquired by Bechtel,
the San Francisco construction concern which then did a massive volume of business in
Saudi Arabia. Around that time, two top officials at Bechtel joined the Reagan administra¬
tion, Secretary of State George Shultz and Caspar Weinberger.

FALSE PROFITS

368 )

When Brady was named treasury secretary in 1988, he became the
boss of William von Raab, the Customs commissioner whose agency
was responsible for Operation C-Chase. In early 1989, von Raab was
suddenly removed from the case (as was William Rosenblatt, the
assistant commissioner for enforcement), ostensibly because he was
suspected of leaking information to journalists. Von Raab says that
this was the only time he was ever taken off a case during his eight
years as head of Customs. He says he doesn’t know if Brady personally
made the decision to remove him, but he says it had the effect of
undermining the investigation: “Effectively, the engine — the genera¬
tor — from the commissioner’s office with respect to the BCCI case
was stopped. It’s very important in a police organization when they see
the head of the organization is no longer driving the case.”

Was Brady lobbied by BCCI as part of its efforts to secure a plea
bargain? Brady has denied meeting with Clifford. Von Raab has no
knowledge of a Clifford-Brady meeting but he does think the BCCI’s
aggressive lobbying campaign had some effect on the department. “I
believe,” he says, “that the Treasury Department was influenced by
lobbying.”

In the White House press conference in October 1991, Bush implied
that he knew very little about BCCI or its backers. If he had wanted to
find out more, he could have asked his own children. His daughter
Dorothy is said to be close to the Altmans. Furthermore, two of the
president’s sons were linked to BCCI in several different ways.

John E. (“Jeb”) Bush socialized frequently with Abdur Sakhia, the
manager of BCCI’s Miami branch and later the bank’s top official in
the United States. Sakhia has said that his family and Bush's got
together several times, maybe a dozen in all. (Bush plays down the
relationship, but declines to discuss it in any detail.) Jeb Bush’s real
estate company, Bush Klein Realty, also manages Grove Island apart¬
ments, a complex of luxury condominiums where Sakhia lived and
where BCCI financed several real estate deals. Bush was involved in
real estate projects with a number of controversial businessmen in
Florida, including Alberto Duque, a BCCI customer.*

George W. Bush has even closer ties to the BCCI network. He likes

*Duque, a Colombian coffee importer, made a big splash in Miami in the late 1970s by
investing heavily in real estate and by cultivating prominent people. When his business
empire collapsed in the early 1980s, it turned out that one of his creditors was BCCI.

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( 369

to point out that he is a second-generation oilman. In 1953, his father
cofounded Zapata Petroleum, which turned into a highly successful
company. The way he tells the story, it sounds like a classic entrepre¬
neurial venture. What he seldom mentions is that wealthy friends of
the Bush family provided important financing.

Decades later, George W. Bush plunged into the oil business in
Texas. He has not been nearly so successful, but there is an important
similarity: rich and powerful friends have financed him. When he set
up Arbusto Energy Inc. in the 1970s, some of the financing came from
James R. Bath, the Texas businessman who, as we have seen, was
allegedly involved with Khalid Bin Mahfouz in the purchase of air¬
planes from the CIA. Bath had other ties to BCCI insiders: he has
invested money in the United States on behalf of Bin Mahfouz and he
was a part-owner of Houston’s Main Bank with Bin Mahfouz and
Ghaith Pharaon. Arbusto fell on hard times in the mid-1980s, when it
merged with another struggling oil concern to form Spectrum 7 Energy
Corporation. But Spectrum 7 didn’t prosper, either. In 1986, Harken
Energy Corporation rode to the rescue, swapping some of its shares to
acquire Spectrum 7. George W. Bush got roughly $600,000 worth of
stock, joined the board of directors, and became a consultant to Har¬
ken for $120,000 a year.

Harken, a small and relatively obscure firm, was not particularly
successful either. In 1987, it was rescued from financial trouble
through a debt restructuring. A few years later, the company’s for¬
tunes changed dramatically. In January 1990, Harken Energy was
awarded one of the most coveted oil deals in the world: a concession to
drill for crude oil off the coast of Bahrain. The decision stunned many
people in the industry. Harken was not only a small firm, it had never
drilled outside the United States, nor had it drilled offshore. The only
explanation that made sense to many oil executives was that the
Bahrain government wanted to do a favor for the family of President
Bush.

The deal was certainly profitable for George W. Bush. After the con¬
cession was awarded to Harken, its stock price rose sharply. In mid-
1990, Bush sold two thirds of his Harken shares at a big profit. (He
failed to disclose this sale for several months — a violation of SEC
rules.) The Wall Street Journal reported in December 1991 that “his
remaining stake could still be worth millions if Harken hits a gusher in
Bahrain.”

The Bahrain contract was signed on January 30, 1990, exactly two

FALSE PROFITS

370 )

weeks after the BCCI plea bargain was announced. Although no proof
has emerged that the Bahrain deal influenced the drug money case, it is
worth noting that an extraordinary number of people connected to
Harken or the oil deal have ties to BCCI.

• Harken’s investment banker is the same firm that helped Abedi’s
front men scoop up stock in First American: Stephens Inc. It was
Stephens Inc. that helped Harken cope with its debts in 1987, and
it did so by arranging financing from Union Bank of Switzerland
(UBS), BCCI’s partner in its Swiss affiliate Banque de Commerce
et de Placements. Former Stephens Inc. executives represented
Harken in the Bahrain deal.

• Bahrain’s prime minister, Sheikh Khalifa bin-Salman al-Khalifa,
helped to ensure that Harken was awarded the offshore drilling
contract. Sheikh Khalifa, a brother of Bahrain’s ruler, was a BCCI
stockholder, according to a 1990 shareholder list.

• Sheikh Abdullah Taha Bakhsh, a big shareholder in Harken, has
made investments in Saudi Arabia with Ghaith Pharaon, BCCI’s
most important front man. The sheikh’s principal banker is an¬
other BCCI insider, Bin Mahfouz. Bakhsh took over Union Bank
of Switzerland’s shares in Harken when UBS ran into regulatory
snags. (Bakhsh’s investments are managed by a board member of
Harken, Talat Othman, who has visited the White House on three
occasions to discuss Middle Eastern policy with President Bush.)

• One of Harken’s consultants on the Bahrain deal, Michael
Ameen, considers Kamal Adham a close friend and has a long¬
standing acquaintance with Pharaon.

• The U.S. ambassador to Bahrain at the time of the deal was
Charles Hostler, an old associate of another BCCI front man,
Mohammed Hammoud. Hostler, who was appointed ambassa¬
dor after contributing $100,000 to Bush’s 1988 election cam¬
paign, has said that he had no involvement with the Harken deal.

All these parties deny any attempt to influence the Bush administra¬
tion by helping either Harken or George W. Bush. The White House
and the president’s son also deny any impropriety. Marlin Fitzwater,
the White House spokesman, says, “There is no conflict of interest, or
even the appearance of a conflict of interest, in these business arrange¬
ments.”

Any organization hoping to wield power in official Washington would
of course be happiest if it could gain the president’s ear or influence

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( 371

those closest to him. But ties to the legislative branch can also be
valuable. Conveniently, anyone who set out to influence Congress
wouldn’t have to make connections with hundreds — or even doz¬
ens — of members. It would be sufficient to forge ties with a few
critical people in the Senate and the House. And BCCI and its allies
were unquestionably interested in securing influence on Capitol Hill.
Powerful congressmen could help the bank and its associates by inter¬
vening on their behalf to slow, contain, or perhaps even stop legal and
enforcement action. Equally important, congressmen could also hurt
them. BCCI was fully aware that congressional committees could hold
embarrassing hearings on their operation. BCCI’s Middle Eastern pa¬
trons were eager to ensure continued access to American arms and
military support. Not surprisingly, then, the bank and its allies seem to
have cultivated a number of congressmen, those with influence in the
judiciary, commerce, defense, banking, and foreign affairs committees.
These were all potential pressure points on the bank or its Arab
backers.

Clifford and his partners helped to foster several of these relation¬
ships by giving money to political campaigns. In 1991, it was esti¬
mated that members of Clifford’s firm had given almost $150,000 to
Democratic campaign committees since 1985. Beneficiaries of
Clifford’s contributions have included several moderate Democrats
who have been contenders (or potential contenders) for the presidency,
including Congressman Richard A. Gephardt of Missouri and Sena¬
tors Joseph R. Biden, Jr. (Delaware), Bill Bradley (New Jersey), A 1
Gore, Jr. (Tennessee), Charles Robb (Virginia), and John D. Rockefel¬
ler IV (West Virginia).

Altman has also been a generous donor. In 1991, it was reported
that he had made about $23,872 in federal contributions since 1987.
He gave $500 to two Democratic candidates during the 1988 presi¬
dential race, Governor Michael Dukakis of Massachusetts and Con¬
gressman Gephardt. Altman’s wife contributed $4,000 to candidates
for federal office in 1987-88, including $1,000 to the presidential
campaign of the Republican senator Robert Dole of Kansas. She also
gave to Congressman John Dingell of Michigan.

Dingell was one congressman whom BCCI might have feared. He
chairs the powerful Energy and Commerce Committee and is widely
regarded as the Grand Inquisitor of Capitol Hill because of that panel’s
aggressive investigations. He might well have used his authority to
look into either BCCI or some of its affiliates, such as Capcom, the
bank’s futures and commodities affiliate. But Dingell has never drawn

FALSE PROFITS

37 2 )

a bead on BCCI, perhaps because of his high regard for Altman. The
Michigan congressman and the Washington lawyer have been close for
years, as have their wives. Dingell, a keen hunter, taught Altman how
to shoot. The congressman has also borrowed from First American. In
1988, he received a $90,000 mortgage for seventy-two acres of prop¬
erty and a hunting lodge in Virginia. (Dingell says that he and his wife
have been customers for many years and that the loan was granted
at market rates.) When Clifford came under attack in early 1991,
the congressman’s wife, Debbie, told a reporter, “I just don’t think
Clark Clifford could be involved with anything that isn’t on the up-
and-up.”

Claiborne Pell, who chairs the Senate Foreign Relations Committee,
could have played a leading role in investigations of the bank. But he
has deferred to his junior, John Kerry. Pell has never been totally
comfortable with Kerry’s inquiry, perhaps because he is an old friend
of Clifford’s and has received campaign money from the venerable
lawyer. In May 1991, when Kerry was busily probing BCCI, Pell
attended the party held by Pamela Harriman to celebrate the publica¬
tion of Clifford’s memoirs.

Senator Sam Nunn of Georgia, the chairman of both the Armed
Services Committee and the Permanent Subcommittee on Investiga¬
tions, was another person who could certainly have hurt or helped the
bank. In recent years, his investigations panel has conducted complex
probes of organized crime and the abuse of bank secrecy by money
launderers and other criminals. In fact, it was at a hearing of this
committee in January 1988 that Leigh Bruce Ritch, the convicted drug
trafficker, said he had used BCCI’s facilities in Panama. There was
apparently no follow-up. By contrast, testimony by Ritch’s partner,
Steven Michael Kalish, and other witnesses prompted the Kerry
Committee’s probe of Noriega and BCCI. One possible explanation
for Nunn’s failure to look into BCCI is that such a probe would draw
attention to his own connections to the BCCI network.

Nunn is well acquainted with Charles Jones, a lawyer in Hinesville,
Georgia, who represented Ghaith Pharaon for years. It was Jones who
spearheaded the lobbying campaign that made it possible for First
American to buy National Bank of Georgia. (Before the takeover could
go through, the Georgia legislature had to modify state banking law.)
The senator has acknowledged meeting with Pharaon on four occa¬
sions between 1984 and 1990; he says they discussed Middle Eastern
affairs.

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( 373

Bob Graham, a Florida Democrat who sits on the Senate Banking
Committee, was also acquainted with BCCI. He attended the opening
of BCCI’s Latin American regional headquarters in Miami as governor
of Florida. He also met with Abdur Sakhia, BCCI’s former Miami
branch manager. Like many other politicians, Graham flew on Cen-
Trust’s corporate jet.

The Senate Banking Committee could have been an ideal vehicle for
probing BCCI, but the chairman, Donald Riegle, ignored repeated
requests from Kerry in 1990 and early 1991 to do so. Finally, in May
1991, one of the subcommittees conducted a single hearing on BCCI.
The timidity of this committee is not surprising in view of the ties of
Riegle and four of the other members to Charles Keating, the head of
Lincoln Savings and Loan who was later convicted of fraud. It would
certainly have been awkward for Clifford and Altman to appear be¬
fore the full committee with their lawyer, Robert Bennett, at their side,
for it was Bennett who had headed the Senate Ethics Committee’s
investigation of “the Keating Five.”

After the July shutdown, Riegle was no longer able to resist pressure
for an inquiry, and he assigned two investigators to the task. One of
them was Timothy McTaggart, a lawyer who had worked for San
Francisco’s Morrison &C Foerster. McTaggart was certainly familiar
with the bank. While employed at the San Francisco firm, he some¬
times assisted one of its most important clients, BCCI.

Other important congressional committees have done little or noth¬
ing to look into BCCI. Neither the Senate nor House Intelligence
Committee has shown much interest in the scandal in spite of BCCI’s
ties to the CIA and the involvement of Saudi intelligence officials in the
affair.

The Senate Judiciary Committee, which is responsible for overseeing
the Justice Department, has not held a single hearing on the conduct
of federal law enforcement agencies in the BCCI case. (In contrast,
Congressman Schumer of New York, a member of the House Judiciary
Committee, has issued two critical reports on the Justice Department.)
The chairman of the Senate’s panel, Joseph Biden of Delaware, has
received campaign money from the chairmen of two U.S. financial
institutions in which BCCI invested through front men: Clark Clif¬
ford of First American and David Paul of CenTrust. Paul and his
associates gave Senator Biden $10,000 for his 1988 presidential cam¬
paign.

A senior Republican on Biden’s committee, Orrin Hatch of Utah,

FALSE PROFITS

374 )

went to great lengths to publicize CenTrust’s ties to BCCI and Paul’s
extraordinary generosity to Democratic politicians. In August 1991,
he issued a strongly worded report on the “ interlocking relation¬
ship” between CenTrust and BCCI. One obvious motive, of course,
was to embarrass the rival political party. But Hatch could well have
had another goal: to deflect attention from his own intriguing ties to
BCCI.

Senator Hatch seems to be the very picture of rectitude. He’s a conser¬
vative politician from a conservative state and a bishop in the Mormon
church. Throughout his political career, he has campaigned against
immorality and advocated traditional family values. During the 1991
hearing by the Judiciary Committee on Clarence Thomas’s nomination
to the Supreme Court, Hatch seemed to be a kind of Cotton Mather
figure, a Puritan who felt profound, visceral disgust at the subjects
under discussion: pornographic films, sexual advances, and crude
speech. It therefore seems strange that Hatch, of all people, would rush
to the defense of BCCI, a bank that had pleaded guilty to money
laundering. But that is what he did in his speech to the Senate on
February 22, 1990.

Hatch said that he had been briefed about the plea bargain by
Justice Department officials, adding in a subsequent interview that he
had “chatted with people around [ Attorney General Richard] Thorn¬
burgh.” He also acknowledged having met with BCCI’s defense law¬
yers — something he had failed to mention in the speech — and that
Robert and Lynda Altman were close friends of his. But the senator’s
ties to the BCCI network were much closer than those remarks sug¬
gested.

It was only in November 1991, almost two years after the strange
speech, that the true story of Hatch’s relationship with BCCI began to
emerge. Several of his connections were revealed in the Wall Street
Journal and on the NBC Nightly News . Since then, further revelations
have come from Hatch’s office and people close to the senator.

As it turns out, Altman met with the senator several times before he
gave the speech, according to a close associate of the senator’s. There
were so many meetings, says this source, that he “practically lived in
Hatch’s office.” Moreover, Altman and other lawyers for BCCI did
more than simply brief the senator, they essentially outlined the speech
for him. Nearly all of its essential elements are contained in a January
9, 1990, letter from Altman to Hatch. In one passage, for example,

The Politicians

( 375

Altman stated, “It isn’t alleged that the bank employees charged ever
dealt with or accepted cash.” He also implied that BCCI and its
employees were largely blameless in the Tampa case, the victims of
“unscrupulous customers.”

When Hatch was later criticized for his speech, he claimed that he
believed at the time that BCCI was a reputable bank. In fact, he had
been warned months before that BCCI was anything but respectable,
according to Michael Pillsbury, a former member of Hatch’s staff.
Pillsbury has told investigators that he gave a series of memos to Hatch
in the late fall of 1989 in which he explicitly warned the senator about
having dealings with BCCI. Nevertheless, said Pillsbury, Hatch per¬
sisted in dealing with Altman.

But does Pillsbury have clean hands? Although he says he warned
Hatch to stay away from BCCI, it appears that Pillsbury himself was
assisting the bank. Investigators for Senator Kerry have found consid¬
erable evidence that Pillsbury provided advice to BCCI’s defense law¬
yers and its PR firm, Hill and Knowlton, in 1989 and 1990. According
to notes taken by one of the defense lawyers, Pillsbury offered sugges¬
tions on how to deal with Kerry’s investigation.

Even though Senator Hatch’s speech, as noted in Chapter 11, was
filled with inaccuracies, it was very helpful to BCCI. At the time, the
bank was trying to persuade state bank supervisors in New York,
California, and Florida not to pull its licenses, and its lawyers sent
copies of the speech to the regulators.

One good turn deserves another, of course. Shortly after delivering
the speech, Hatch asked BCCI to lend money to a friend of his. He
called the chief executive, Swaleh Naqvi, to ask whether BCCI would
finance Monzer Hourani in his Texas real estate business. When NBC
News asked Hatch whether he had approached BCCI, he denied it.
When it became clear that NBC knew about the call, he admitted that
it had taken place, adding that Altman had given him Naqvi’s name
and telephone number.

For his part, Hourani said that he followed up by sending a detailed
loan proposal to BCCI at Hatch’s suggestion. In a three-page letter to
Naqvi dated April 2, 1990, Hourani asked BCCI to finance four real
estate projects in Chicago, Minneapolis, and Clear Lake, Texas. These,
he wrote, included multifamily and office buildings. Hourani pro¬
posed that BCCI provide him with “equity for [these] projects in the
form of letters of credit.” The projects, he wrote, ranged in size from
$10 million to $20 million, and he sought “approximately $10 mil-

FALSE PROFITS

37^ )

lion” of financing from Naqvi’s bank.* It isn’t clear what assistance, if
any, BCCI gave Hourani. (Hourani has claimed that he never received
any financing from BCCI.)

Hatch reacted quickly to the embarrassing disclosures. In interviews
and a press release, he sought to portray the telephone call as entirely
normal, just a piece of networking for a friend. “Hourani was having
problems finding financing for his real estate developments,” the sena¬
tor said in late November 1991, “and I thought perhaps an Arab bank
would consider helping him.” He explained that his friendship with
Hourani dated from the mid-1980s and was partly based on their
shared devotion to the Mormon faith. Hourani, a Lebanese American,
was a convert, Hatch explained. He denied in an interview in late 1991
that he had ever made other calls to Naqvi, an assertion contra¬
dicted by Pillsbury, who says the senator called Naqvi as many as nine
times.

Hatch’s relationship with Hourani was actually much closer than
the senator implied. They were such good friends that Hourani once
gave Hatch an abstract painting worth $1,000, according to a
financial disclosure statement filed by the senator. In addition, Hatch’s
office had once intervened with regulators to help Hourani.

In 1986, Hatch wrote to the office of the director of the Federal
Savings Loan Insurance Corporation (FSLIC) on behalf of Hourani,
who was then in trouble over borrowings from Houston’s Mainland
Savings, which had been taken over by the FSLIC. Hatch, who said he
was writing “at the request of constituents,” wrote that his staff had
found possible grounds for “substantial legal process against Main-

*The same day Hourani wrote that letter, Naqvi’s right-hand man, Dildar Rizvi, sent a
note to Altman in which he mentioned Senator Hatch:

“Dear Boh,

“A friend of ours in London, Sir Julian Ridsdale, who is a Member of the British
Parliament and belongs to the Conservative Party, shall be visiting Washington DC from
April 17th to 2.1st 1990. He has known Mr. Abedi, Mr. Naqvi and other senior executives
of BCCI for a number of years and has been very supportive to us during our recent ordeal
in Tampa.

“I was wondering if you and Mr. Clifford would be able to spare a few minutes to meet
him and exchange greetings. He has volunteered to speak to selected members of the Senate
or Congress, including Senator Hatch and assure them of BCCI’s seriousness to act as good
corporate citizen. Since he has known the senior management personnel of BCCI for a
number of years he may be able to convey this message forcefully. I leave it entirely to you
to weigh and decide whether any advantage can be had from this approach.

“Yours sincerely,

“[signed] Dildar

“Enel. Resume of Sir Julian Ridsdale with Washington DC contact phone number.”

The Politicians

( 377

land Savings/FSLIC by Hourani and his associates.” The letter seemed
to cajole the FSLIC, saying the difficulties it had with Hourani “may be
capable of resolution.” Yet the letter claimed “we certainly don’t want
to interfere in any way with your processes.” The FSLIC’s general
counsel, Harry Quillian, replied to Hatch on September 19, 1986,
countering that the FSLIC believed it might be Mainland that had
claims against Hourani. Both sides — Hourani and the FSLIC — had
made offers to settle the disputes, Quillian said, but the FSLIC recog¬
nized its obligations to maximize the amount of money it could re¬
cover. Hatch now claims that he never saw the letter to the FSLIC sent
out over his signature. He maintains that it was signed with his “auto¬
matic pen” by a former staff member, but he says he takes full respon¬
sibility for the letter.

Hourani has even been involved in managing the senator’s personal
finances. Hatch, according to his financial disclosure statements, is the
beneficiary of a trust administered by Hourani. One asset of the trust is
a small apartment, worth about $20,000. It was registered in Hou-
rani’s name.

Hatch’s relationship with the BCCI network goes far beyond his
friendship with Altman and his efforts to get money for Hourani.
There’s also the matter of First American’s loan to COP, the Chiefs of
Police National Drug Task Force, a nonprofit group run by Randy
Anderson, whose father is the columnist Jack Anderson. First Ameri¬
can wrote off the loan rather than force Randy or his father to honor
the guarantees they had signed. Randy Anderson said COP would
eventually repay the money. Hatch was the chairman of COP.

Hatch also had some links to the netherworld of spies and arms
dealers of which BCCI was such an important part. He acknowledges
having met with Adnan Khashoggi, who — with the help of BCCI —
was an important middleman in the Iran-contra arms transactions. For
several years, Khashoggi had based much of his business empire in Salt
Lake City. Hatch said that in meeting Khashoggi, he was simply ex¬
tending the courtesies he would to any big investor in Utah. Hatch was
also a booster of the Afghan rebels.

But Hatch’s most intriguing connection to BCCI concerns a Middle
Eastern businessman named Mohammed Mahmoud Hammoud. A
fascinating and enigmatic character, he appears repeatedly in the sor¬
did history of the bank. He was an important BCCI front man, with
connections to an assortment of powerful people in Washington.

FALSE PROFITS

378 )

Hammoud, a Shi’ite Lebanese merchant, first appears in the story in
the 1950s, when he became friendly with Charles Hostler. Three de¬
cades later, as we have seen, Hostler became a major campaign con¬
tributor to George Bush; he was also Bush’s ambassador to Bahrain
when the government awarded the oil concession to Harken.

When Hammoud and Hostler met, the American was a foreign
service officer in Beirut and his Arabic tutor was Hammoud’s wife.
Hostler had come to the State Department from a background in
intelligence with both the CIA and its predecessor, the Office of Strate¬
gic Services. In 1974-76, during Gerald Ford’s presidency, Hostler was
a senior official in the Department of Commerce. He then became
active in the real estate business in San Diego. Hammoud used Hostler
as a consultant on some of his real estate investments in the United
States, which were financed by BCCI. Hostler, speaking through a
spokesman from the U.S. embassy in Bahrain in December 1991,
admitted to giving Hammoud some advice on real estate over the years
but maintained they hadn’t had “any direct business dealings.”

Hammoud’s association with BCCI may have begun in the early
1970s, when the bank was founded. He soon became a pliant front
man for Abedi, serving as a nominee shareholder in both BCCI and
First American. Hammoud played a role in the dubious investments by
Clifford and Altman in First American stock. When BCCI arranged for
the two lawyers to sell a large part of their holdings in 1988 at a big
profit, Hammoud was supposedly the buyer. The Lebanese business¬
man paid $6,800 per share for stock that had sold for just $2,430 per
share seven months earlier. In 1990, the stock changed hands for
$2,774 P er share. Investigators believe that Hammoud was nothing
more than a front man for BCCI in this transaction.

Hatch apparently met Hammoud in the early or middle 1980s.
When his relationship with the Lebanese was revealed in the press in
late 1991, the senator said he had met with Hammoud on one or two
occasions in Washington to discuss the hostage situation in Lebanon.
Hammoud, the senator explained, had also visited him in Washington
later, as part of a Lebanese delegation sponsored by the United States
Information Agency. In the mid-1980s, when Hatch chaired the Senate
Labor Committee, he went to Geneva for International Labour Or¬
ganisation meetings. On one such trip he tried unsuccessfully to look
up Hammoud at his house in Evian, France, just a few miles from
Geneva.

Other people close to the senator also knew Hammoud, including

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Hatch’s friend Monzer Hourani and Michael Pillsbury. In fact, the
Hammoud family was going to publish a monograph that Pillsbury
planned to write on modern Lebanese politics. Investigators for Sena¬
tor Kerry would later raise questions about the project, wondering
whether it was a quid pro quo for Pillsbury’s assistance to BCCI’s
lawyers and PR men after the crisis in Tampa. Pillsbury claims that
there was nothing improper about it.

In spite of all these links between Hammoud and Hatch’s circle, the
senator has claimed that he had no idea that Hammoud was connected
with either BCCI or First American. That is simply not true, according
to Pillsbury. He maintains that Hatch not only knew of Hammoud’s
ties to BCCI but that Hammoud even lobbied the senator on the bank’s
behalf. In late 1989 and early 1990, he says, Hammoud met with
Hatch and urged him to stand up and support the BCCI plea bargain.
Pillsbury adds that Hammoud also met with other U.S. politicians at
that time, including the late John Tower, a former Republican senator
from Texas."*

It was just after these alleged meetings that several important events
occurred. Hatch was lobbied by Altman and other BCCI lawyers; the
BCCI plea bargain agreed to by Bush’s Justice Department was an¬
nounced; the government of Bahrain awarded its oil concession; Hatch
delivered his speech defending the plea bargain; and Hatch called
BCCI’s Naqvi to solicit financing for Hourani.

Hatch continues to insist that he was in the dark about Hammoud’s
ties to BCCI throughout this period. He said he did not learn of the
connection until May 1990, when the article in Regardie’s identified
Hammoud as a shareholder in BCCI and First American. A few days
after the article came out, Hammoud died — or seems to have died.

The Lebanese businessman, who had gone to Geneva from Evian,
reportedly collapsed and died in his doctor’s office in early May. Ac¬
cording to a medical report and a statement written by his wife, he died
during an endoscopy, an examination that involves inserting a rubber
tube down a patient’s throat. The cause of death, according to the
autopsy report, was the rupture of a main artery close to the heart.
Insurers, however, wouldn’t pay out on his life policies, according to a
London lawyer acting for Hammoud’s mother, because the body was
ten centimeters (about four inches) shorter than at the time of Ham-

*Tower was close to President Bush, who, after the 1988 election, nominated him as
secretary of defense, but the Texan failed to win Senate confirmation.

FALSE PROFITS

380 )

moud’s last medical examination. This lawyer also expressed amaze¬
ment that the family sent him a videotape of Hammoud’s funeral. The
obsequies had apparently taken place in Beirut and been attended by
senior Syrian government officials.

One person who doubts that Hammoud really died is Nazir Chinoy,
a BCCI official who was convicted in the Tampa case. Conversely, a
federal investigator who is working on the BCCI case thinks the Leba¬
nese really is dead, and he suspects foul play. Hammoud, says this
source, knew too much about BCCPs machinations and he was too
talkative for his own good.

A medical report on Hammoud’s death prepared in October 1990
by a physician from Harley Street, the home of some of London’s most
prestigious doctors, was very critical of the treatment Hammoud was
apparently given before his death and also of the autopsy report. The
circumstances weren’t right for an endoscopy, the report by Dr. D.
Forecast said, as Hammoud had eaten a full breakfast and was due to
catch an airplane within an hour of the procedure. It added that
Hammoud was “a known hypertensive suffering from intermittent
chest pain.” Forecast also said that the autopsy report was “surprising
and clearly inadequate.” An emotional statement given by Ham¬
moud’s wife, Violette, to the Swiss authorities raises further questions
about the medical treatment. The account insists that Hammoud
didn’t want an endoscopy but that the two doctors present insisted,
even preventing Violette Hammoud from reaching her husband when
he was choking on the tube.

After Hammoud’s apparent death, Michael Pillsbury, it seems, tried
to help the family liquidate Hammoud’s First American stock. A mes¬
sage faxed to Altman in April 1991 from Pillsbury shows that the
former Hatch staff member was right in the middle of negotiations
with Kassem Hammoud, Mohammed Hammoud’s son, about the pro¬
posed transfer of First American stock from the father’s name to that
of the son. The message to Altman, in which Pillsbury addressed him
as “Bob” ended: “I will call again today about meeting Senator Hatch,
or you may hear from [his] personal secretary Ruth Carroll.” Pillsbury
also forwarded to Altman an April 24 message that Kassem Ham¬
moud had faxed to BCCI’s chief executive, Zafar Iqbal. It sought —
unsuccessfully, as it turned out — to establish title to Mohammed
Hammoud’s stock in First American and have it reregistered in the
names of his heirs. Pillsbury now plays down his relationship with
Altman, saying that he has met with him only twice in his life and that

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he was involved on only one occasion in the negotiations over the
Hammoud stock in First American. That involvement, he says, re¬
sulted from his friendship with the Hammoud family.

If Hammoud really died, he certainly took a lot of secrets with him.
It would be interesting to know about his role as a front man for BCCI,
his purchase of First American stock from Clifford and Altman, and,
of course, his friendships with powerful Americans like Hatch. When
the Utah senator was asked in October 1992 about his ties to Ham¬
moud and BCCI, he explained through a spokesman that he had asked
the Senate Ethics Committee to look into the matter and did not want
to discuss it for the time being. At Hatch’s request, the committee is
also investigating Michael Pillsbury.

Hammoud’s relationships with American politicians are also being
examined by some of the law enforcement officials who have been
digging into BCCI’s past. Several investigators believe that Hammoud
was more than simply a front man for BCCI, that he was also a bag
man for the bank — a purveyor of money and favors to powerful
people. Intercepts of telephone conversations made by a U.S. intelli¬
gence agency indicate that Hammoud knew a tremendous amount
about BCCI’s clandestine activities. In a conversation just hours before
his “death,” Hammoud told a friend, “If anybody knew how dirty the
Americans are in this BCCI business, they’d be surprised — they’re
dirtier than the Pakistanis.”

BCCI’s political power was impressive, but it was not, of course,
unlimited. Some members of Congress have been willing to investigate
the rogue bank, notably two Democratic party mavericks: Senator
John Kerry and Congressman Henry Gonzalez. After the shutdown of
the bank, they learned increasingly shocking information about
BCCI — including details of its ties to the CIA.

One area that intrigued Kerry’s staff was how much the CIA had
known about the bank and whether it had circulated that information
to other federal agencies. William von Raab, the Customs commis¬
sioner, contacted the CIA around the time of the Tampa indictment to
find out what the agency knew about BCCI. Robert Gates, who was
then the CIA’s deputy director and is now the director, provided a
report that von Raab has described as “well-written pabulum.” He
said he later discovered from British Customs agents that the CIA had
used BCCI to make payments for clandestine operations in many parts
of the world.

FALSE PROFITS

382 )

During the fall of 1991, investigators for Kerry discovered that over
the years the agency had prepared hundreds of reports mentioning
BCCI, some of which contained allegations of serious crimes. A few of
these reports were distributed widely within the federal government,
yet somehow the crucial information did not reach the people respon¬
sible for dealing with BCCL Even when reports did reach appropriate
officials, the information failed to make an impression.

One report, dated September 30, 1986, contained allegations of
BCCI’s involvement in drug trafficking and money laundering. It also
stated that BCCI had secretly gained control of First American. The
report was distributed to the State, Treasury, and Commerce depart¬
ments and other agencies; but, according to Senator Kerry, it was not
given to the one agency responsible for First American Bankshares: the
Federal Reserve.

At Treasury, the report apparently went to Robert Bench, the associ¬
ate deputy comptroller of the currency who went to work for Price
Waterhouse in 1988. But Bench told the Kerry Committee that he had
no specific recollection of the document. His response is puzzling
because Douglas P. Mulholland, an assistant secretary of state who
had been with the Treasury Department, said that Treasury documents
confirm that Bench received the CIA report. While Mulholland didn’t
recall specifically to whom he gave it at Treasury, he said Bench was his
regular contact at the Office of the Comptroller of the Currency
(OCC). Mulholland added that a secondary record indicates that he
showed the report to Donald Regan, then treasury secretary. (Regan
said that he didn’t recall seeing the report and suggested that it may
have gone to James Baker, his successor, who at the time was traveling
in Morocco. Regan told the reporter, “Call Morocco!”)

In May 1989 — seven months after BCCI was indicted — the CIA
issued a further substantial report in which it repeated the assertion
that BCCI controlled First American. This document was also sent to
the State, Commerce, and Treasury departments, but it was not given
to the prosecutors in Tampa who were planning to put BCCI on trial.
Treasury’s failure to forward the report is particularly striking. Opera¬
tion C-Chase had been run by the Customs Service, which is part of the
Treasury Department. Another unit of Treasury is the OCC, the chief
regulator of nationally chartered banks, including banks owned by
First American Bankshares.

Chairman Gonzalez of the House Banking Committee uncovered
connections between the BCCI affair and another multibillion-dollar

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scandal: the secret funding of Iraq by Italy’s Banca Nazionale del
Lavoro (BNL). There were disturbing parallels to the BCCI affair. The
Federal Reserve, which was responsible for regulating BNL’s Atlanta
branch, had failed to detect the massive fraud. At a hearing on BCCI,
Gonzalez said that “the existence of another foreign bank entity
[BCCI] engaged in criminal activity comes as no great surprise,” par¬
ticularly because BNL “became Baghdad’s banker in the U.S. before
our regulatory cops at the Federal Reserve could locate Iraq on the
map.”

There were also signs of a cover-up of BNL’s activities by the Reagan
and Bush administrations. Why was no one indicted until February
1991, eighteen months after BNL’s lending spree was discovered?
There were suspicions that the White House was eager to sweep this
messy scandal under the rug, since it threatened to highlight the
government’s role in supporting Saddam Hussein before the invasion
of Kuwait. As early as 1983, President Reagan had instructed the CIA
to provide intelligence to help Iraq in its war with Iran. Washington
continued providing aid to Baghdad for the next seven years — up to
the time of the invasion.

When the lead defendant, BNL’s former Atlanta branch manager,
Christopher Drogoul, pleaded guilty, he was not obliged to make a
public accounting of what had occurred, and the judge suggested that
this smacked of a cover-up. Marvin Shoob of the U.S. District Court in
Atlanta said in the summer of 1992. that an independent counsel
should be appointed to investigate the matter. The House Judiciary
Committee also requested an independent counsel, but Attorney Gen¬
eral William Barr refused, maintaining that the department’s investiga¬
tion had been adequate. In September, shortly before his sentencing,
Drogoul hired a new defense lawyer and started to set out evidence
that pointed to a much wider conspiracy than the government had
alleged. Soon after that, the plea agreement was canceled.

Congressman Gonzalez held a hearing on BNL in September during
which he quoted from a confidential CIA document that said the
agency had long been aware that the bank’s head office was involved in
the Atlanta branch’s loans. Gonzalez also released State Department
cables showing that senior BNL officials had met with the U.S. ambas¬
sador to Italy in late 1989 and asked that the U.S. government use
“damage control” to address the spreading BNL scandal. Gonzalez
said the documents undercut the Bush administration’s argument that
Drogoul had acted without the knowledge of his superiors.

FALSE PROFITS

384 )

In the course of his BNL probe, Gonzalez had found evidence of
close ties between BCC 1 and the Italian bank. Alfred Hartmann, a
board member of BCCI who ran the bank’s Swiss subsidiary —
Banque de Commerce et de Placements (BCP) — also happened to be
chairman of BNL’s Swiss bank, Lavoro Bank A.G. Hartmann has
asserted that there was no particular significance to these overlapping
roles.

But there were many other strange coincidences. For example, Hart¬
mann had been vice chairman of Bank of New York-Intermaritime, a
bank in Geneva controlled by Bruce Rappaport, an oilman thought to
have ties to U.S. and Israeli intelligence. * The Swiss banker was also
associated with Charles Keating, the S&L bandit who had so many
friends on the Senate Banking Committee. (Hartmann and Keating
served on the board of a shadowy investment company in the Bahamas
called Trendinvest Ltd.) As the investigations continued, it sometimes
seemed as if half the characters in the BCCI and BNL affairs were
either spies or politicians.

As the charges and countercharges about BCCI echoed through
Washington, most of the people responsible for its crimes were beyond
the reach of the law. Many of them were shielded by friends in high
places.

After the collapse of the bank, two of the Gokal brothers, whose
companies had received an enormous volume of fraudulent loans from
BCCI over the years, left Western Europe. Abbas Gokal is believed to
have moved to Pakistan; his brother is said to be in Iran.

Kemal Shoaib was also out of reach. He had helped to assemble
BCCI’s Latin American network, had been involved in overseeing its
underground empire of U.S. financial institutions, and then served as
chairman of one of those secret subsidiaries, Independence Bank. The
Federal Reserve and U.S. prosecutors regarded Shoaib as one of the
most important culprits in the BCCI affair, but that didn’t seem to
matter at all to the Pakistani government. After all. Prime Minister
Nawaz Sharif had long been close to BCCI. The government even
decided that Shoaib was fit to run a bank. In the fall of 1991, Pakistani
authorities awarded ten new bank licenses and Shoaib was one of the

*Rappaport was also a major investor in Bank of New York, which happened to be one
of BCCI’s principal correspondent banks in the United States.

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lucky recipients. Another recipient was Arshad Nawabi, who had been
BCCPs top man in Dubai. He had financed a steel mill owned by Prime
Minister Sharif’s family, according to an accountant familiar with the
transaction. (BCCI’s customers should have been enraged, but there
was no uproar in Pakistan, because the government bailed out local
depositors. BCCPs depositors in most other countries, of course, were
not so lucky.)

Banking licenses aside, the ethics of Sharif’s government certainly
seemed lacking in matters of high finance. In May 1992, the Securities
and Exchange Commission brought its first-ever action against a for¬
eign government when it charged Pakistan with offering unregistered
bonds that appeared to be tailor-made for money laundering. Earlier
in the year, Pakistan’s government had run advertisements for the
bonds in major American newspapers containing such promises as
“No Questions Asked About Source of Funds!” and “No Identity to
be Disclosed!”

The most important political allies of BCCI were not just in Paki¬
stan, of course, but also in the UAE. The backing of Sheikh Zayed had
been crucial to the success of BCCI, and in late 1991 and early 1992,
investigators were increasingly focusing on his role.

Zayed’s advisers and spokesmen have portrayed the sheikh as an
innocent dupe of BCCI and as the biggest single victim of BCCPs
crimes. Over the years, according to his advisers, the Abu Dhabi ruler
pumped hundreds of millions of dollars into BCCI, and he is expected
to pay out even more money as partial compensation to depositors.
The compensation could exceed $2 billion.

Many observers readily accepted this characterization of the victim¬
ized and innocent sheikh. In a series of feature articles on the seized
bank in November 1991, the Financial Times published estimates that
BCCI had stolen more than $2 billion from Zayed, attributing the
information to “sources close to the investigation of the scandal-rid¬
den bank.”

If Zayed were indeed innocent, it would stand to reason that he
would do his utmost to bring the suspects to justice. Curiously,
though, there seemed to be little sense of urgency in Abu Dhabi when
BCCI was taken over by the regulators. It was not until September
1991 that Zayed’s government arrested BCCI employees suspected of
crimes. Among the suspects were Naqvi and Iqbal. The conditions
were not particularly onerous: the detainees were lodged at the Abu
Dhabi Officers’ Club. Moreover, law enforcement officials in the

FALSE PROFITS

3^6 )

United States and Britain were forbidden to interrogate the BCCI
officials in Zayed’s custody.

One man who was angered by the lack of cooperation was Senator
Kerry. Eventually he was able to extract some commitments from an
Abu Dhabi official. At a hearing in May 1992, Ahmed Al-Sayegh, a
financial adviser to the Abu Dhabi government, claimed that “the idea
of cooperation has just taken off.” He added that “from this point on,
nothing will obstruct it.” Months later, these appeared to be empty
words. At the opening of a hearing on BCCI, Kerry said, “I regret to
report that we are now at the end of July and we have been informed
by both the Justice Department and the district attorney of New York
that no such cooperation has taken place. Not a document and not a
witness held in Abu Dhabi have been produced to U.S. law enforce¬
ment concerning BCCI.”

Around the same time Kerry made this complaint, investigators
were discovering that people close to Zayed had been withholding
information about BCCI for years. Lord Justice Bingham, who began
investigating BCCI at the request of the British government, found that
Abu Dhabi officials had known about massive fraud at the bank long
before the shutdown and yet had failed to turn this information over to
Price Waterhouse and the Bank of England. A portion of Bingham’s
draft report, leaked to the press in July 1992, highlighted the impor¬
tance of an April 1990 meeting involving Swaleh Naqvi and senior
Abu Dhabi officials, including Crown Prince Khalifa, Zayed’s eldest
son. The report concluded that if that information had been communi¬
cated, the bank would probably have been closed much earlier.

The behavior of Zayed’s government only fueled suspicions that the
Abu Dhabi ruler wasn’t really the biggest victim of the BCCI affair but
one of the biggest villains.

Spokesmen for Sheikh Zayed have tried hard to play down his role in
BCCI. James Lake of the public relations firm of Robinson, Lake,
Lerer &c Montgomery, which represents the sheikh’s interests in Wash¬
ington, D.C., even tries to avoid describing Zayed as a stockholder.
Instead, the PR man uses the vague expression “the majority share¬
holders.” This is a distinction without a difference, because “the ma¬
jority shareholders” comprise Zayed, members of his immediate fam¬
ily, and the Abu Dhabi Investment Authority (ADIA), which is
controlled by the sheikh.

Lake has also promoted the idea that Zayed and his entourage were

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“passive” investors in the bank. This is not simply misleading; it is
false. Zayed, as we have seen, was by far the most important investor
in BCCI and was represented on the board by one of his financial
advisers, Ghanem al-Mazrui. More than a year before the bank was
seized, Zayed acquired majority ownership and removed Naqvi as the
CEO. Long before that happened, BCCI officials were so intimately
involved in managing investments for the sheikh (and handling other
chores) that they were de facto members of his court.

Beyond these connections, several people close to Zayed were in¬
volved in dubious financial dealings with BCCI. Price Waterhouse had
found that Mazrui had benefited from riskless transactions in shares of
BCCI arranged by Abedi and Naqvi. In 1985, Mazrui for no apparent
reason received payments from ICIC, the notorious BCCI dummy
company in the Cayman Islands. In addition, his signature appears on
a confirmation for what was in reality a fictitious loan in the name of
Zayed’s eldest son, Khalifa. (Mazrui told Price Waterhouse in early
1991 that he didn’t recall signing the confirmation and said his signa¬
ture may have been forged.) Allegations of misconduct by Mazrui
were contained in the first book on the BCCI scandal: Bankrupt: The
BCCI Fraud, by the British journalists Nicholas Kochan and Bob
Whittington. When the book was published in November 1991, Maz¬
rui retained a libel lawyer and had it withdrawn from British book¬
stores. It was soon reissued with deletions and amendments to the
contested passages.

BCCI also made loans to Zayed and several close associates, accord¬
ing to a summer 1991 copy of its loan portfolio. This document shows
loans to Zayed, his relatives, his government, and courtiers totaling
more than $1.5 billion. Zayed’s lawyers at Washington’s Patton, Boggs
&C Blow say such documents from BCCI are questionable and insist
that the sheikh is a victim who has lost billions of dollars in the whole
episode. There are some borrowings they don’t dispute, however. For
instance, BCCI made a $55 million loan on a thirty-nine-story office
tower in New York. The firm that owns that building, 330 Madison
Company, is 75 percent controlled by the ADIA.

Members of Zayed’s family were also enriched by BCCI, benefiting
from no-risk transactions in the bank’s shares, according to Price
Waterhouse. In addition, BCCI had structured transactions in its own
shares that benefited ADIA.

Investigators also found that an extraordinary number of people
close to Zayed had acted as front men by posing as shareholders in

388 ) FALSE PROFITS

BCCI and First American. Some of the nominees were Abu Dhabi
government officials. Ali Mohammed Shorafa, who had been the di¬
rector of presidential affairs in the UAE and one of Zayed’s most senior
advisers, was a nominee in First American. In 1985, BCCI paid him
$300,000 for the use of his name and $100,000 a year for two more
years. The ranks of the nominees also included members of the ruling
families of neighboring emirates, who depend on handouts from Za-
yed. The rulers of Fujeirah and Ajman — Sheikh Hamad al-Sharqi and
Sheikh Humaid al-Naomi — allowed their names to be used in the
acquisition of First American. Sharqi was paid an annual fee of about
$400,000 for his services by BCCI and another $500,000 a year as a
profit on the other shares he held for BCCFs benefit. At one point, as
much as 24 percent of First American’s stock was held in Sharqi’s
name.

Had Zayed and his relatives also acted as front men?

When Abedi arranged for a group of clients to acquire stock in First
American (then Financial General) in late 1977 and early 1978, the
purchases were made in the names of four men: Kamal Adham of
Saudi Arabia, Faisal Saud al-Fulaij of Kuwait, Zayed’s son Sheikh
Sultan, and Zayed’s financial adviser Abdullah Darwaish. (Darwaish
was holding the stock on behalf of Zayed’s young son Mohammed.)
Sheikh Sultan soon sold his stock to Adham. Other investors later
joined the group, including Zayed’s ADIA and his son Khalifa.

By mid-1991, U.S. and British investigators had confirmed that
several of First American’s stockholders were front men for BCCI,
including Adham and Fulaij. But they were unable to prove that Zayed
and his associates were also nominees. One reason their role in First
American was obscure is that his government refused to provide criti¬
cal documents and witnesses. Eventually, though, investigators began
to obtain evidence from other sources.

One informant was Akbar Bilgrami, a BCCI official who had been
convicted in the Tampa drug money case. In the late 1970s and early
1980s, he had been involved in Zayed’s real estate investments in
Spain. In the summer of 1992, he told members of Senator Kerry’s staff
of an incident in early 1978, when Abedi was scooping up stock in
First American. Bilgrami, who was visiting Spain, was told that he
would be receiving a set of documents by courier and that he should
have them signed by Zayed’s financial adviser Abdullah Darwaish.
Bilgrami said that the documents indicated that Darwaish would be
paying for the stock with a BCCI loan. The papers also included a

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( 389

blank power of attorney form for him to sign. The clear implication of
Bilgrami’s statement is that Darwaish was fronting for BCCI at the
very beginning of the takeover attempt.

One man with far more extensive information on the takeover is
Riaz Saleem Aslam, a Pakistani accountant who served as financial
adviser and deputy to Darwaish, the chairman of Zayed’s Department
of Personal Affairs (DPA). In the early 1980s, Abu Dhabi authorities
arrested both men on fraud charges, as noted in Chapter 3. Darwaish
was soon released but was apparently forbidden to leave the country;
Aslam was not freed until 1990. These may have been trumped-up
charges. Some investigators now suspect that their real offense was
knowing too.much about the illegal takeover of First American and
being able to incriminate Zayed. Abedi is believed to have encouraged
Crown Prince Khalifa to order the arrests.

The detention of Aslam silenced him for more than a decade. After
his release, he returned to his native Pakistan to spend time with his
family, but he also went to Europe to meet with lawyers and advisers.
Through intermediaries, he started to provide evidence to law enforce¬
ment authorities and bank regulators in the United States and Britain.

The Pakistani accountant wrote some of the statements recently, but
he maintains that others were written while he was in detention and
that they were smuggled out. He did this, he said, because he feared for
his safety and wanted to make a record of Zayed’s and Abedi’s acts to
protect himself from “unforeseen circumstances.”* A statement from
early 1983 bears the signature of M. A. K. Afridi, Aslam’s lawyer at the
time, and is marked as follows: “This note was handed over to my
associate, Hussain Abdullah Samahoni of the law firm of A. R. Hilal
and Associates on February 20 1983.” According to Aslam’s current
lawyer, Afridi has sworn an affidavit in London that he made that
notation in 1983. This document, which covers thirteen pages, de¬
scribes the relationship between Zayed and BCCI. It also contains

* Aslam has stated that he was harshly treated while in custody. (The UAE’s human
rights record has been criticized by Amnesty International and other observers.) In making
his allegations against Zayed, Aslam has exposed himself to considerable risk. Should he
return to Abu Dhabi, he could be arrested; the statutory penalty for publicly defaming the
ruler ranges from twenty years’ imprisonment to death. He could also be forced to pay fines
even if he does not return. When Aslam was released in 1990, the Abu Dhabi authorities
made him sign a document agreeing to a claim of $110 million against himself and his
family. This claim, according to the document, can be enforced at the sole discretion of
Zayed. The claim was registered in Abu Dhabi, Pakistan, and Switzerland. The U.S. consul
in Abu Dhabi refused to register it.

FALSE PROFITS

390 )

serious charges against several of the people involved in the takeover
of First American.' 4 "

Aslam was a senior financial adviser in the DPA from 1975 to late
1981. During his tenure, he said in one of his statements, “I became
aware of certain acts which upon recollection were unlawful — but
have been hushed up and/or suppressed and/or ignored as they were
for the benefit of the DPA and certain interested parties.” The most
important of these, he wrote, was the First American takeover, “which
involved directly, the Ruler Sheikh Zayed and the [DPA’s] chairman
Abdullah Darwish carrying out actions upon the advice of Mr. A. H.
Abedi” and other employees of BCCI.

In the events leading up to the takeover, “it is my specific knowledge
as an employee of the DPA, that certain misstatements, forging of
documents, fraudulent statements, fraudulent information, perjury
under oath, suppression of material facts, misuse of privileged infor¬
mation for personal gain and conspiracy to effect all or some of the
above took place and were perpetrated partly or wholly by Sheikh
Zayed, Sheikh Sultan bin Zayed, Sheikh Mohammed bin Zayed (then
a minor), Abdullah Darwish, Agha Hassan Abedi, S. H. Naqui,” and
others. Aslam stated that his knowledge of these events was based on
his direct participation in meetings as well as conversations with
Darwaish and with BCCI employees.

Aslam strongly denied that he was guilty of defrauding the sheikh
and said he was arrested because the authorities were fearful that he
would reveal what he had learned while working for Zayed. They were
particularly concerned that he would talk about the First American
acquisition. (Aslam obtained his freedom only after signing a docu¬
ment in which he promised to remain silent about his work for the
ruler.)

He described the takeover as a “collaboration between Mr. Abedi,
acting in his usual role as primary banker and advisor to Sheikh Zayed
and with his known ambitions (previously deterred) to own a bank in
the U.S., and Sheikh Zayed personally and through his private depart¬
ment seeking a safe haven for his funds politically protected.” It was
also imperative that the takeover be completed without the disclosure
of Zayed’s name. In a statement written in 1991, Aslam said, “The

*These statements have not been released publicly, but the authors of this book have
obtained copies along with supporting documents. In his statements, Aslam uses alternate
spellings for the names of certain individuals.

The Politicians

( 39i

record shows that from the first purchases of Financial General’s stock
in 1977 and 1978 until now there have been many violations of U.S.
law and misrepresentations to U.S. authorities which masked the in¬
volvement of Sheikh Zayed until it became uncontainable recently.”

On several occasions, according to Aslam, Darwaish said that Za¬
yed gave Abedi full discretion in the takeover. “Mr. Abedi,” he wrote,
“never concealed his intent to control [First American] as the effective
arm of BCCI, which he said would benefit the ruler both through
ownership of BCCI and direct ownership of a Washington D.C.
bank.”

Zayed was himself involved in the initial purchases of shares, ac¬
cording to Aslam: “The shares which were ultimately represented as
purchased by the two sons [of Zayed] through BCCI had been allo¬
cated to them as nominees for Sheikh Zayed, who purchased them
with his own knowledge, his own funds, and designated his sons as
nominees to keep secret his ownership.”

Those holdings, Aslam said, were reallocated to Zayed’s sons Sultan
and Mohammed only after “the implications of adverse publicity and
regulatory violations became evident.” Furthermore, these original
purchases were made with DPA funds, which came through BCCI. In
order to disguise this switch in ownership, a BCCI officer “produced
fictitious entries in the bank records at BCCI Emirates to show that
Sultan and Mohammed paid funds from their personal accounts to
mask the fact that they had actually been paid for by the DPA, which
was undeniably Zayed’s money by ownership and control and bene¬
ficial interest.”

Dildar Rizvi, a former senior BCCI officer, is believed to have cor¬
roborated Aslam’s statements in September 1992. In interviews in
Pakistan with investigators from the Justice Department and from
Morgenthau’s office, he gave an account of the takeover that closely
agreed with that of Aslam, according to people close to the investiga¬
tion.

While investigators were trying to figure out who was behind the
crime, BCCI’s depositors were clamoring for their money, and they
hoped to get it from Zayed. This was more than a little ironic; de¬
frauded depositors were expecting to be paid by the ruler of an emirate
that was harboring many of the people who had organized the heist, a
ruler who may even have been a central figure in the fraud. The
dimensions of the fraud had gradually become clear after months of
work by the court-appointed liquidators from Touche Ross. In a re-

FALSE PROFITS

39 2 )

port issued in December 1991, they estimated BCCI’s total liabilities at
$10.64 billion and its realizable assets at $1.16 billion. In other words,
a staggering $9.48 billion had vanished through a combination of
mismanagement and fraud. There was no longer any doubt that the
BCCI affair was one of the biggest larcenies in history.

BCCI’s depositors desperately sought to recover as much as they could
from the ruins of the bank. Their best hope, of course, was that the
liquidators would be able to extract significant amounts of money
from Zayed and some of the bank’s other backers and would also
succeed in pursuing many of those who had been involved in looting
BCCI.

The liquidation was extraordinarily complex and would therefore
take months, if not years. For a start, BCCI owed money to 800,000
depositors with 1.2 million accounts in more than seventy countries,
according to Sir Donald Nicholls, Britain’s vice chancellor (one of the
country’s senior legal figures).

The Touche Ross report implied that depositors would be able to
recover only about ten cents on the dollar, because BCCI’s liabilities far
exceeded assets. In fact, there would be even less money available,
because the liquidators had been incurring huge expenses to wind up
the bank. According to their report, they had already run up expenses
of £113 million (about $200 million). They also estimated a further
$239 million in expenses before the liquidation was complete, mean¬
ing that the liquidators would altogether spend some $440 million —
almost 40 percent of the bank's estimated realizable assets.

Depositors were furious when they found out that the senior liqui¬
dator, Brian Smouha, had been flying on the Concorde. A huge number
of Touche Ross employees in Abu Dhabi seemed to be living quite
comfortably, according to several sources. They set up their own soc¬
cer team and had special shirts made up. Aggrieved depositors, some
of whom had lost their life savings, were further embittered when they
saw how quickly the expenses were mounting up. There were also
doubts about Smouha’s strategy. He wanted to recover money from
Zayed through negotiation rather than through the courts, as some of
the depositors advocated.

No settlement would be possible until Smouha resolved the criminal
and civil cases that had been brought by U.S. authorities. BCCI had
been indicted on federal charges as well as state charges in New York.
It was accused of an array of offenses, including money laundering,

The Politicians

( 393

larceny, tax evasion, and a bewildering variety of frauds. In addition,
the Federal Reserve had accused BCCI of violating a long list of
banking laws and regulations. Around the end of 1991, Smouha nego¬
tiated a guilty plea on behalf of BCCI to all charges brought by New
York State, the federal government, and the Federal Reserve.

The U.S. District Courthouse in Washington, D.C., where parts of
the Watergate and Iran-contra scandals had unfolded, now became the
setting for an important episode in the BCCI saga. At a hearing on
January 9,1992, Smouha agreed to settle with Uncle Sam. Judge Joyce
Hens Green would formally approve the controversial agreement on
January 24. The deal entailed BCCI’s liquidators giving up $550 mil¬
lion, all of BCCPs American assets. These assets consisted mostly of
cash and liquid investments in New York. The funds would be split
into two roughly equal parts. One portion would go to the worldwide
victims’ fund that would be used to pay BCCI depositors as part of a
global settlement of the bank’s obligations. The other part would be
used to shore up First American and Independence Bank. (No money
ultimately went to Independence, since it was soon taken over by the
regulators.) The liquidators also agreed that $10 million of the for¬
feited money would be paid as a fine to the Manhattan district attor¬
ney’s office. As part of the settlement, the Federal Reserve agreed to
drop a $200 million fine that it had assessed BCCI in the summer of
1991.

Before the settlement, the liquidators had been negotiating with the
authorities in Abu Dhabi, Luxembourg, and London in an attempt to
sort out BCCI’s tangled affairs. Luxembourg approved the deal the
liquidators had made with Morgenthau’s office, the Justice Depart¬
ment, and the Federal Reserve, but Abu Dhabi wasn’t part of it.

The U.S. settlement was only a portion of the worldwide agreement
that Smouha was trying to pull together. On January 15, the High
Court in London issued its much-delayed order to liquidate BCCI’s
British operations. Similar orders followed in the Cayman Islands,
Scotland, and the Isle of Man.

The formal winding up of BCCI meant that the compensation of
depositors could begin properly in many countries. Until then, various
ad hoc measures had allowed depositors in some countries to get back
small percentages of their funds. In Britain, a payment of £45 million
from Abu Dhabi had allowed depositors and staff to receive some
monies; depositors had also been able to get an emergency payment of
up to £3,000 from the Bank of England. In Canada, Arthur Andersen,

FALSE PROFITS

394 )

the accounting firm that acted as liquidators of BCCI Canada, had in
December allowed that its six thousand depositors would receive ten
Canadian cents on the dollar as a first payout on their C$203 million
in deposits. The Canadian Deposit Insurance Corporation had already
paid out C$22.5 million.

There were attempts to stop BCCIs settlement with the U.S. govern¬
ment, especially by parties who had their own claims against the bank.
For example, a syndicate of underwriters at Lloyd’s of London, which
had for years pursued claims against the Jordanian merchant Munther
Bilbeisi and BCCI for an alleged coffee-smuggling scheme, contested
the settlement in federal courts in both Washington and New York.
But the suit was thrown out on January 23.

The next major piece of the proposed worldwide settlement fell into
place in February, when Abu Dhabi indicated it would contribute $1.7
billion to the settlement of depositors’ claims over a period of four
years in three separate payments. The complex agreement proposed
that if depositors’ claims totaled more than $10 billion, the emirate
would contribute more money to an eventual maximum of $2.2 bil¬
lion. But if claims were significantly less than $10 billion, Abu Dhabi’s
contribution could drop to $1.2 billion. There were some caveats,
however. The whole scheme required at least 70 percent of BCCI’s
depositors, by value of funds, to waive their rights to claim against
Abu Dhabi.

To many depositors this contribution seemed meager, especially
since Abu Dhabi had apparently been prepared to contribute more
than $4 billion in capital and guarantees to the proposed restructuring
of BCCI back in April 1991. Smouha and his colleagues, as part of the
deal, also agreed to give up the bank’s claims to more than $3 billion of
promissory notes issued in early 1991 by Abu Dhabi as part of the
aborted restructuring. Some depositors were also outraged that the
liquidators had agreed that if more than $2.5 billion was realized from
the liquidation of BCCI’s assets, those excess monies would be divided
equally between Abu Dhabi and the liquidators.The BCCI Depositors’
Association was skeptical of the proposed agreement and said that the
creditors needed more time to study it in detail. Mourad Fleming, a
lawyer for the association, said that the creditors were being asked to
give up “very considerable rights,” including the right to sue Abu
Dhabi.

Smouha was defensive about the agreement. “It’s not a cover up or
anything like that,” he told the Financial Times . “This is meant to

The Politicians

( 395

make peace with the United Arab Emirates.” He argued that under the
proposed agreement with Abu Dhabi, depositors could expect to get as
much as io percent by the end of 1992. and as much as 30 to 40 percent
eventually. Without Abu Dhabi, he said, there were only remote pros¬
pects of a worthwhile dividend and there might even be no payout
until the year 2000.

The proposed settlement, however, needed the approval of courts in
London, the Cayman Islands, and Luxembourg as well as the agree¬
ment of the depositors, and some of that proved hard to get. A com¬
mittee of BCCI’s biggest depositors was especially critical of the pro¬
posal, though the London and Caymans courts approved it. The
Luxembourg court would finally ratify the settlement on October 22,
1992, after it had been approved by a sufficient majority of the bank’s
creditors.

The liquidators now began to go about the business of trying to
collect more money from those who allegedly shared responsibility for
the scandals at BCCI. On March 12, the liquidators’ lawyers issued
writs in England against Price Waterhouse and Ernst & Young, former
auditors for the bank. The suits, which named thirty-six defendants,
alleged breach of duty and of contract as well as negligence in audits of
BCCI carried out in 1985 and 1986. Those audits covered the period
when BCCI suffered huge losses in its treasury division, estimated at
more than $600 million.

By the fall of 1992, however, the liquidators had done little to press
their claims against Price Waterhouse. For years, the auditors had been
satisfied with bland assurances and scanty documentation from BCCI.
Why wasn’t more being done to hold Price Waterhouse accountable?

In the months following the seizure, it often seemed that few investi¬
gators — apart from those at Morgenthau’s office — were eager to get
to the bottom of the affair and to bring the perpetrators to justice.

ROUNDING UP

the Suspects

Harry W. Albright, Jr., was finally settling down to enjoy a
bit of retirement, starting to mix in a few games of tennis with a little
part-time legal work. A soft-spoken and gentlemanly family man, he
was beginning to feel relaxed and healthy again. The last year had been
traumatic. At the age of sixty-five, Albright had been struck by severe
coronary problems that required open-heart surgery just as he was at
the point of retiring as chairman of Dime Savings Bank, one of New
York’s biggest financial institutions.

One day in December 1991, Albright received a telephone call from
his old friend Bob Morgenthau. The two men had been partners at
Patterson Belknap in the 1950s. (Years later, Albright served as New
York State’s banking superintendent.) “Your Uncle needs you,” Mor¬
genthau said. Albright was puzzled. “That’s your Uncle Sam,” Mor¬
genthau explained, saying that he wanted Albright to act as trustee for
First American Bankshares of Washington, D.C. As the trustee, he
would control and vote a majority of the bank holding company’s
shares. The shares had belonged to BCCI, but the Federal Reserve had
ordered that a trustee be appointed to control the stock; and as part of
the settlement of the government’s case against BCCI, Morgenthau
won the right of veto over the choice of the trustee.

Albright was surprised and flattered, but he didn’t want to move to
Washington, and he was concerned about the reaction of his wife and
family to his taking on such a responsibility so soon after major
surgery. But Morgenthau wouldn’t take no for an answer, and he
eventually persuaded his friend that there was a major public interest
in ensuring that First American was managed properly and that major-

( 396 )

Rounding Up the Suspects ( 397

ity control was in the hands of a person not connected to Washington’s
lobbyists and political fixers. After talking it over with his wife, Al¬
bright decided to accept Morgenthau’s offer.

It was a measure of Morgenthau’s success with the BCCI case, how
he had become the driving force in exposing the affair, that he had
succeeded in getting the power effectively to choose the trustee of First
American. Here was a district attorney from Manhattan deciding who
should control a major banking institution in Washington, D.C. There
was a widespread feeling in the press and the public that only Morgen-
thau had the ability and the moral authority to deal with this mam¬
moth financial and political scandal. Clearly, there had been a terrible
breakdown of the supposed system of law and regulation in the capital
if a widely respected district attorney felt he could trust only his
own appointee when it came to ensuring that First American was run
independently.

The Federal Reserve didn’t seem to share Morgenthau’s enthusiasm
for Albright, presumably because he was not a Washington insider.
Some on the staff are believed to have resisted his appointment, but
Morgenthau prevailed with the help of a few allies at the Fed. I11 June
1992, Judge Joyce Hens Green approved the appointment of Albright.

Meanwhile, Morgenthau’s probe into BCCI was becoming more fo¬
cused on some of its Saudi Arabian backers. One important target was
Khalid Bin Mahfouz, the Saudi banker, who had long been an associ¬
ate of several people in Abedi’s circle. In 1977, for example, he and
Ghaith Pharaon were among the four investors who took over Hous¬
ton’s Main Bank. But it was a decade later that his relationship with
BCCI became close, and it was this period that intrigued Morgenthau’s
investigators.

Khalid Bin Mahfouz certainly does not fit the stereotype of the
conservative banker. He used to wear a ponytail, and he has a taste for
fast cars. But there is no denying the importance of his status — and
that of his family — in the affairs of Saudi Arabia. The Bin Mahfouz
family owns a controlling stake in National Commercial Bank (NCB),
the largest bank in the kingdom, with hundred of branches. It was
founded by Khalid’s father and run by his sons, with Khalid acting as
the first among equals. One sign of the family’s status is that the Bin
Mahfouz act as bankers to King Fahd and other members of the ruling
family.

When BCCI admitted in the spring of 1985 that it had suffered

FALSE PROFITS

398 )

substantial losses in options trading, its image was seriously damaged.
The following year, however, Abedi won plaudits when he announced
that the Bin Mahfouz family had acquired a large block of BCCI stock.
Pierre Jaans, the Luxembourg bank regulator, was certainly pleased.
“It seemed most impressive,” he later said, “the way Abedi was able to
come up with capital when he needed it.”

Khalid Bin Mahfouz and his three brothers paid nearly $1 billion for
their stake in BCCI, and Khalid joined the board of directors. As of
October 1988, BCCI listed the brothers as the owners of 20 percent of
the bank’s stock. (Internal BCCI records showed that they actually
owned close to 30 percent.) Around the same time, the family bought
a large stake in First American. Khalid, who would tell Western inves¬
tigators that he ran NCB with “absolute authority,” had been at¬
tracted to BCCI by its far-flung international network, which he saw as
a good complement to his family’s own banking operations in Saudi
Arabia. He and his brothers also liked the Muslim character of the
bank. Further, they had all the introductions they thought they needed
to BCCI’s management; Khalid’s right-hand man, Haroon Kahlon,
was a Pakistani bureaucrat who was well acquainted with several of
BCCI’s senior officers.

One of the main reasons the Bin Mahfouz investment helped BCCI’s
image was that National Commercial Bank was generally regarded as
strong and profitable. The reality, though, was quite different. NCB
had done quite well for a number of years, but it was now in financial
straits. Oil prices were falling sharply, and this was, of course, disas¬
trous for the Saudi economy. Many of NCB’s borrowers stopped
servicing their debts, and the bank would soon suffer large losses. But
BCCI didn’t know this at the time, just as the Bin Mahfouz family did
not know that Abedi’s bank was effectively a bankrupt institution.
This was like two drowning men clinging to one another, each believ¬
ing that the other is strong and buoyant.

It did not take long for Khalid Bin Mahfouz to realize that BCCI was
far from healthy. In fact, he and NCB took part in some of the fraudu¬
lent activities that damaged BCCI, it was later alleged. Price Water-
house said in its spring 1991 report to the Bank of England that the
“collusion” of Bin Mahfouz and NCB “appears to have been a major
factor in hiding the fraud at BCCI.” The auditors focused on the
family’s purchase and subsequent sale of their stake in BCCI. They
termed BCCI’s purchase of the shares “unauthorized” and said that
$190 million of the money used to buy the stock was of questionable

Rounding Up the Suspects ( 399

origin, although they did not say exactly why. A report dealing with
ICIC said that NCB received “undisclosed payments” in the settlement
of the share purchase.

In addition, the auditors charged that NCB lent about $400 million
to BCCI’s customers on behalf of BCCI, taking cash collateral from
Abedi’s bank. But, Price Waterhouse said, NCB had represented to
auditors that this cash collateral was made up of routine interbank
deposits. These transactions allowed BCCI to pretend it had increased
the strength of its balance sheet greatly and also helped to conceal
fraud at BCCI, the auditors said.

BCCI’s last chief executive, Zafar Iqbal, approved certain question¬
able transactions booked through the accounts of Crown Prince Kha¬
lifa of Abu Dhabi, according to evidence unearthed in early 1991 by
Price Waterhouse. Iqbal apparently took instructions from Naqvi in
structuring these transactions, which involved routing funds to re¬
purchase BCCI shares held by Bin Mahfouz. These dealings were
themselves illegal because they weren’t reported to regulators. Price
Waterhouse had also found an account at NCB’s Bahrain bank that, it
alleged, was used by BCCI “for the purposes of fraudulently routing
funds.”

Price Waterhouse, of course, had qualified its reports to the Bank of
England, indicating that these findings were what the firm believed to
be the case but stressing that it felt more research was necessary to
reach definitive conclusions about the nature of the frauds.

When the auditors’ statements first became public in the Wall Street
Journal in February 1992, Lawrence G. Smith, an NCB official in New
York, said, “We reject in the strongest terms any implication of collu¬
sion or fraud.” He pointed out that many of BCCI’s records were
erroneous and suggested that Price Waterhouse’s conclusions might
well be based on such misleading records. Smith went on to say that
the auditors’ charges were “absolutely untrue” and complained that
Price Waterhouse would make such “an extraordinarily serious
charge” against a man of “honor, dignity, and prominence” like Kha-
lid Bin Mahfouz. The account at NCB’s Bahrain branch, Smith said,
“was an account. Money came in, money went out. We didn’t know
what it was used for.”

In spite of the vociferous denials, Morgenthau’s investigators took
the Price Waterhouse reports quite seriously, and they began to de¬
velop additional information on the conduct of Khalid Bin Mahfouz.
Of particular interest was the secret deal the Saudi banker made with

FALSE PROFITS

400 )

Abedi when his family invested in BCCI. Abedi, as we have seen, had
agreed that Bin Mahfouz could sell the stock back — at a profit —
whenever he wanted to. What this means, of course, is that the invest¬
ment did not really represent an infusion of capital. It was, in effect, a
loan that could be called at any time.

Morgenthau’s team found evidence of other irregularities connected
to this investment. When the Bin Mahfouz family paid for the stock,
$755 million of the funds were fraudulently recorded on BCCI’s books
as deposits. In addition, the investigators found that BCCI had lent Bin
Mahfouz $270 million to help him come up with most of the remain¬
ing purchase money. When the Bin Mahfouz family disposed of their
BCCI stock in 1987, all of it was bought by ICIC, Abedi’s dummy
company, and most of the money, the investigators believed, was
stolen from BCCI depositors. In addition, Khalid Bin Mahfouz kept
the sale secret from the regulators until 1989. (Even more oddly, BCCI
had told the public that some of the stock Zayed bought in 1990 came
from Bin Mahfouz.)

The failure to disclose the sale also meant that BCCI’s depositors
were led to believe that Saudi Arabia’s top banking family stood
behind BCCI. Two months after the Tampa indictment, BCCI released
the names of its “shareholders”; the list named Khalid Bin Mahfouz
and his three brothers as owning a total of 20 percent of BCCI’s stock.

As the New York D.A. closed in on Khalid Bin Mahfouz in the
spring and summer of 1992, there were increasing signs that NCB was
in serious trouble. It had not released any financial statements since the
end of 1989, and regulators wondered what horrors the family was
hiding. In Saudi Arabia, there were rumors that members of King
Fahd’s family had borrowed huge sums from NCB — as much as $3
billion — and often had failed to make interest or principal payments.

Morgenthau’s investigators decided that they understood enough
about Bin Mahfouz’s dealings with BCCI to move against the Saudi.
The New York D.A. was the first prosecutor to take any action. Only
his office had figured out how important the most powerful Saudi
Arabian banking family was to keeping BCCI in business with its
prestige and with underhanded financial transactions. The federal
prosecutors were still wrestling with problems that Assistant District
Attorney John Moscow and others on Morgenthau’s staff had re¬
searched for as long as two years.

On July 2, 1992, Morgenthau announced that a New York County
grand jury had indicted Khalid Bin Mahfouz and his aide Haroon

Rounding Up the Suspects ( 401

Kahlon for defrauding BCCI and its depositors of as much as $300
million. Depositors’ funds had been used to buy the Bin Mahfouz
shares, and he was aware of their provenance. The indictment also
included several infractions of New York banking laws, many involv¬
ing Bin Mahfouz’s alleged practice of not informing regulators about
large and questionable financial transactions with BCCI.

The indictment was a sign that the Saudi elite may have been inti¬
mately involved in BCCI’s criminality. Until now, Abu Dhabi’s Sheikh
Zayed had attracted most of the attention when the media focused on
the bank’s Arab backers. Attention soon shifted to other prominent
Saudis: Kamal Adham, who had for years helped with BCCI’s corrupt
schemes, and Abdul-Raouf Khalil, another Saudi intelligence officer
with ties to the CIA. Both men, of course, had acted as front men for
BCCI in its purchase of First American, although Khalil denies wrong¬
doing.

At a press conference to announce the indictment of Bin Mahfouz
and Kahlon, Morgenthau refused to speculate on Bin Mahfouz’s links
to Adham, the Saudi royal family, or other members of the kingdom’s
elite. The D. A. stayed close to the text of his prepared statement. There
was one flash of humor, albeit a somewhat pejorative one: “Is he [Bin
Mahfouz] married?” one journalist asked. “How many times?” Mor¬
genthau replied with a grin.

The Saudi establishment was stunned by the indictment; its inten¬
sive lobbying of the State Department had been to no avail. Mor-
genthau’s office refused to kowtow to foreign policy considerations, in
any case. King Fahd called Ambassador Charles W. Freeman, Jr., to
voice his shock and sadness at the news. The king even asked if the U.S.
government would make a public statement vouching for the safety
and stability of the Saudi banking system. Ambassador Freeman had
to demur politely and explain that the law — or at least a maverick
prosecutor’s office in New York — had to take its course.

One week after the New York indictment, the Federal Reserve
charged that Bin Mahfouz had been scheming to obtain control of
both BCCI and First American in 1986. For a variety of banking
offenses, the Fed fined Bin Mahfouz $170 million and Kahlon $6
million. Also, the Fed alleged, though Bin Mahfouz’s family bank lost
money from its investments in BCCI, Bin Mahfouz personally made
$120 million from the transactions.

The Fed had also come under tremendous pressure from the Saudi
authorities, who had sought to settle the issue of Bin Mahfouz’s in-

FALSE PROFITS

402 )

volvement with BCCI quietly. The Saudi Arabian Monetary Agency
(SAMA), the kingdom’s central banking authority, wanted desperately
to keep the name of King Fahd’s banker out of the press. “They are
concerned about what implications it will have for the Saudi banking
system as a whole,” a senior Bush administration official told a re¬
porter shortly after the New York indictment.

Even after the announcement of the indictment, officials from
SAMA and their lawyers from the New York firm of Davis, Polk &
Wardwell were still closeted in talks with Fed officials in New York. If
the Fed planned to keep the affair as quiet as possible, it failed. Leaks
to the press forced the Fed to announce its action on July 8, almost a
week after the indictment. The Fed’s order had been signed on July 2,
so why hadn’t it been made public earlier? Some suspected the effects
of pressure from the Saudis and the State Department. But a Fed
spokesman denied any such thing, blaming the July 4 holiday and
other factors for the time lag.

Khalid Bin Mahfouz and his family appeared to come under consid¬
erable financial pressure after the New York charges were announced.
Some bankers in London and New York cut back on the amount of
business they were prepared to do with NCB. On July 7, NCB sold a
large quantity of silver. Dealers at the bank told traders that the sales
were on behalf of clients and totaled less than 20 million ounces. Many
observers believed those particular clients to be members of the Bin
Mahfouz family, though at least one associate of the family denied this.
The price of silver dropped dramatically as others sold with NCB.
Traders estimated that about 40 million ounces were dumped on the
market on July 7, as the price of silver plummeted 15.8 cents, to $3.90
an ounce. That was a huge amount of silver to hit the market in one
day; altogether it equaled about 7.5 percent of the annual worldwide
sales of the precious metal.

As this drama unfolded in the New York courts and the world’s
metals markets, Bin Mahfouz himself was in Jiddah, well beyond the
reach of Morgenthau’s office.

Other investigators, including Britain’s Serious Fraud Office, were
starting to play an active role in the BCCI case. Police in London made
their first arrest in the BCCI scandal in early February 1992 when they
detained Mohammed Abdul Baqi, the former managing director of
BCCI-controlled Attock Oil Company, as he arrived at Heathrow
Airport. Baqi allegedly had told Price Waterhouse that BCCI had lent

Rounding Up the Suspects ( 403

more than $76 million to Attock when it had done no such thing.
These bogus loans had been used to help dress up the bank’s shaky
accounts. The sixty-six-year-old executive was charged with conspir¬
ing with BCCI to deceive its auditors.

On March 20, 1992, the SFO had charged Imran Iman — the BCCI
officer who handled the accounts of Pharaon and First American —
with conspiring to falsify records and concealing $105 million of loan
guarantees. This action, though, didn’t endear the SFO to Morgen-
thau; Iman had crossed the Atlantic to testify about BCCI as a cooper¬
ating witness with the Manhattan D.A.’s office. That same month,
the SFO arrested the British-Asian businessman Nazmu Virani and
charged him with conspiracy to mislead BCCI’s auditors and other
offenses. In the fall of 1992, he was in custody awaiting trial.

The SFO also had begun investigating several people who had
worked for Price Waterhouse. One target was Richard Fear, a former
partner who had been involved in auditing BCCI. Fear left the firm in
1986 and moved to the Cayman Islands. Two years later, he received
two payments — one for $80,000, the other for $20,000 — from
Capcom, the infamous BCCI satellite in London. Capcom’s records do
not indicate what the payments were for; a company ledger listing the
second one simply reads “Paid to Richard Fear.” (On several occa¬
sions, Fear was asked — through his lawyer — to comment on the
payments. He did not respond.)

A Price Waterhouse spokeswoman said that the firm had conducted
its own investigation of the payments and determined that they were
“unconnected with [Price Waterhouse’s] audits of BCCI.” However,
law enforcement authorities apparently suspect that there may be
some suspicious connections between Fear and BCCI. In June 1992,
the Cayman Islands police raided the homes of both Fear and another
former Price Waterhouse official, Richard Harris, according to two
people familiar with the BCCI case. The police, who were working on
behalf of the SFO, also raided the office of a Caymans law firm that
had represented either Harris or Fear as well as Price Waterhouse’s
Caymans office.

The SFO, like Morgenthau, also focused considerable attention on
Kamal Adham. The Saudi was just as interested in his potential prose¬
cutors; he had for months arranged meetings with them ostensibly to
protest his innocence but also to sound out the possibility of making a
deal. Adham likes to travel in the West and enjoys his apartment in
Belgravia, arguably London’s poshest district. He didn’t want to spend

FALSE PROFITS

404 )

his days hiding out from the SFO and Morgenthau’s investigators. He
missed Paris, and, furthermore, he had property and investments in the
United States and Britain that could be seized by prosecutors. He
is also a kinsman of the Saudi ruling family — a brother-in-law of
the late and respected King Faisal — so settling his case might re¬
move some of the taint that the Saudis had suffered from the BCC 1
scandal.

The indictment of Khalid Bin Mahfouz and the SFO’s new co¬
operation with Morgenthau had a galvanizing effect on Adham and
his business manager, Sayed Jawhary. They realized they could be next.

In July, Morgenthau’s office notified Adham’s lawyer, Plato Ca-
cheris, and Jawhary’s lawyer, Sarah Moss, that it was preparing to
indict their clients for a list of alleged infractions of state laws. After
months of on-again, off-again negotiations, the defense lawyers in¬
formed Morgenthau’s office that Adham and Jawhary were prepared
to make a deal. If Morgenthau dropped some of the charges, Adham
would pay a large fine and agree to assist the prosecutors. If the plea
negotiations ended successfully, it would be a major breakthrough for
Morgenthau. It would mean that Adham, who had played a central
role in BCCI’s illegal takeover of First American, would testify against
others, including Clark Clifford and Robert Altman.

Morgenthau’s investigation of BCCI had been widely praised, but
there was also a degree of cynicism. Defense lawyers and reporters
pointed out that the indictments had only included foreigners with
strange names who were thousands of miles outside the jurisdiction of
the New York courts. The D.A. had now been investigating BCCI for
more than three years, and skeptics were beginning to wonder if he
would ever bring charges against any Americans, let alone such a
personage as Clifford.

Nevertheless, Morgenthau was preparing to do just that, and he was
receiving valuable assistance from the federal authorities. The Justice
Department and the Federal Reserve were also investigating Clifford
and Altman, and they were exchanging information with the Manhat¬
tan D.A.’s office. Since the arrival of Attorney General William Barr a
year earlier, cooperation between the Justice Department and the
D.A.’s office had improved considerably.

In broad outline, the federal and state investigations were quite
similar, but they dealt with the laws of two different jurisdictions. The
Justice Department and the Fed were looking for evidence that Clif-

Rounding Up the Suspects ( 405

ford and Altman violated U.S. laws and banking regulations in con¬
nection with the ownership and management of First American. Mor-
genthau had to prove violations of New York State laws, but he had
more flexibility than this might suggest. For example, if one or more
acts in an alleged conspiracy had occurred in New York, he could
argue that state law had been violated.

By the summer of 1992, the federal and state investigators had
found a great deal of information that seemed to undermine the asser¬
tions of Clifford and Altman that they had been dupes of BCCI. As
early as 1983, for example, Altman attended two BCCI conferences at
which one of the speakers, a National Bank of Georgia official named
Bill Batastini, expressed his happiness at being part of the BCCI family.
This was a clear indication that BCCI had secretly controlled at least
one U.S. bank. Four years later, an official of First American Bank of
New York (FABNY) sent a memo to Clifford and Altman regarding an
employee who had recently been dismissed. Attached to the memo was
a letter in which the former employee made it clear he regarded First
American as a BCCI subsidiary. In one passage he wrote, “Either FAB
must take over and become First American Bank and buy out BCCI
shares, or let them have it.”

Other information gathered by the investigators suggested that
BCCI officials had an important say in the management of First Amer¬
ican. In 1982, according to the Fed, Abedi and Naqvi chose a suite of
offices at 350 Park Avenue as the headquarters for FABNY. When
Clifford and Altman objected that the rent was too high, Abedi over¬
ruled them, according to the Fed. Conveniently, BCCI’s New York
office was just down the street, at 320 Park Avenue. BCCI also played
a role in the hiring of First American executives; about nine prospec¬
tive employees were interviewed by Abedi or other BCCI officials.

Beyond the evidence relating to the ownership and control of First
American, the prosecutors and the Fed believed that Clifford and
Altman had lied repeatedly to the authorities. One example concerns
First American’s controversial investment in certificates of deposit
issued by ICIC, the BCCI dummy company. Altman, according to the
Fed, had made the decision to buy the CDs, yet, when questioned by
the Fed, he testified that he did not know who made the decision.
Altman also allegedly lied about the lucrative investment in First
American stock that he and Clifford had made. In testimony to the
Fed, Altman said he did not know how the price was determined when
he and Clifford sold most of the stock. According to Imran Iman, a

FALSE PROFITS

406 )

BCCI official who worked on the transaction, Altman himself had
been involved in fixing the sale price.

Iman was just one of several witnesses to the alleged wrongdoing by
Clifford and Altman, but Morgenthau was hoping to get still more.
Adham and Jawhary could be of tremendous help, but their lawyers
said the Saudis would not make a deal unless they were guaranteed full
immunity from future prosecution in the United States. Morgenthau
could give them immunity in New York, but the Justice Department
would have to agree to immunity from federal charges.

While trying to work out a deal with the Saudis and the Justice
Department, Morgenthau was racing the clock. Some of the charges he
was contemplating had to do with First American’s acquisition of
National Bank of Georgia. The takeover had occurred in 1987, and
there was a five-year statute of limitations. By late July, Morgenthau
decided to seek an indictment from the grand jury.

On July 22, a Manhattan grand jury returned sealed indictments
against Clifford, Altman, and other suspects. Within days, two of the
most important witnesses against them made their deal. Adham and
Jawhary stole into New York on Monday, July 27, to sign cooperation
agreements with the Manhattan D.A.’s office and the Justice Depart¬
ment. Both men pleaded guilty to violating New York State banking
law. A company controlled by Adham, Arabian Industrial &c Commer¬
cial Company, pleaded guilty to charges of fraud. As part of the deal,
Adham agreed to pay a fine of $105 million, about $90 million of
which was divided roughly between the Federal Reserve and the liqui¬
dators of BCCI. Most of the rest of the money was split among various
law enforcement agencies. The trustee for First American received as
much as $2 million to help finance his operation; some of that money
would be used to hire an investigator to look over First American to
make sure that it was fit for sale and that there weren’t any hidden
horrors in its books.

On Tuesday, July 28, the news broke in the press that Morgenthau
was planning to announce the indictment of Clifford and Altman the
next day. The Justice Department, eager to avoid being scooped by the
New York D.A., raced to finish its own indictment. One problem was
that Justice was planning only to charge Altman. Clifford, it appeared,
was going to be spared because of his advanced age and heart prob¬
lems. (Some cynics wondered whether his political influence played a
role.)

Ironically, Justice’s plan to keep Clifford’s name out of the indict-

Rounding Up the Suspects ( 407

ment could actually hurt the lawyer, because it could mean that he
would be facing Morgenthau’s well-prepared prosecutors in a New
York courtroom rather than Justice Department lawyers, who were
relative newcomers to the case. If, however, he were charged in both
places, he might be tried only in Washington because of New York’s
strict double jeopardy law."' Clifford’s lawyers, according to one
source, even urged the Justice Department to put him back in the
indictment. (An attorney for Clifford says this is false.)

It was now the Justice Department’s turn to race the clock. Morgen-
thau scheduled his press conference for Wednesday morning. For the
federal charges to be announced at the same time, a bill of indictment
would have to be presented to a federal grand jury in Washingtpn early
that morning. The prosecutors worked for hours on the document,
finally completing it at 4:00 a.m. A few hours later, the grand jury
voted to indict.

At 11:00 a.m. on Wednesday, July 29, Assistant Attorney General
Robert S. Mueller III announced that a federal grand jury in Washing¬
ton had returned a three-count indictment against Clark Clifford and
Robert Altman. They were accused of conspiring to defraud the Fed¬
eral Reserve Board by misleading it about BCCI’s relationship with
First American and obstructing the Fed’s inquiries into BCCI. They
were accused of seeking to “curry favor with BCCI” by arranging for
First American to buy National Bank of Georgia and depositing $45
million in ICIC. The grand jury also alleged that Clifford and Altman
had lied to the Fed about BCCI’s loans to First American shareholders,
including the loans that the Washington lawyers had themselves re¬
ceived. As Mueller provided details of the federal charges, Robert
Morgenthau was holding his own press conference in New York,
making even more sweeping allegations.

Morgenthau announced two indictments containing charges against
a total of six defendants. One of the indictments accused Abedi,
Naqvi, Pharaon, and Fulaij with participating in “enterprise corrup¬
tion,” New York State’s version of RICO (the federal Racketeer In¬
fluenced and Corrupt Organizations Act). This indictment alleged that

’''Although the U.S. Constitution forbids trying a person twice for the same crime, the
Supreme Court has ruled that it is sometimes permissible for a person to be tried twice —
once in federal court and once in state court — on similar charges. The theory is that each
court system represents a different “sovereign.” New York State, however, has a double
jeopardy law that gives defendants more protection than the Supreme Court rulings.

FALSE PROFITS

408 )

BCCI had been a criminal enterprise since 1972 and that it had used an
array of fraudulent schemes to achieve its ends, including the bribery
of public officials. According to the indictment, the bank had paid
millions of dollars in bribes to central bankers or other financial of¬
ficials in a dozen developing countries: Argentina, Cameroon, Colom¬
bia, the Congo, the Ivory Coast, Morocco, Nigeria, Pakistan, Peru,
Senegal, Tunisia, and Zambia.

The second New York indictment accused Abedi, Naqvi, Clifford,
Altman, and Fulaij of participating in a scheme to defraud. Much of
the indictment dealt with BCCPs illegal takeover of First American; the
grand jury alleged that the defendants began conspiring to acquire the
banking company in 1977. Clifford and Altman were also accused of
conniving in transactions that weakened First American but benefited
BCCI, such as the takeover of National Bank of Georgia. In exchange
for their help to BCCI, Clifford and Altman received tens of millions of
dollars in legal fees and profits from stock deals. The grand jury
characterized these as bribes.

The charges carried maximum penalties of eight years in jail and
$80 million in fines for Clifford and twenty years and $80 million for
Altman. In practice, though, neither man would suffer such penalties
even if convicted on all counts; sentences invariably run concurrently,
meaning that neither man would have to serve more than four years,
the maximum prison sentence for any of their alleged crimes.

Morgenthau told reporters that now perhaps half the BCCI story
had been made public, but that much still remained to be investigated
and revealed. The prosecutor sharply criticized Abu Dhabi, maintain¬
ing that the emirate hadn’t given any cooperation to the New York
investigators despite its promises: “We haven’t gotten a single thing in
the past year.”

That same day, the Federal Reserve issued a long order detailing
Clifford’s and Altman’s many alleged infractions of banking regula¬
tions. It said it was considering whether to ban the two men from U.S.
banking for life, but it wouldn’t impose a fine against them for fear of
triggering the double jeopardy clause of the Fifth Amendment to the
Constitution, which would bar criminal prosecution.

Clifford and Altman pleaded not guilty to all charges and vowed to
fight to clear their names. Through their lawyers at Skadden, Arps,
they released a brief statement claiming that the charges were “a cruel
and unjust abuse of the prosecutorial function” and the product of a
horse race between prosecutors and investigators at the Manhattan

Rounding Up the Suspects ( 409

district attorney’s office, the Justice Department, and the Federal Re¬
serve. The three agencies were “seeking public acclaim for their role in
fighting BCCI corruption and to deflect criticism for their past fail¬
ings.” Clifford and Altman said they had become “the most visible,
convenient targets for government bodies that wish to demonstrate
that BCCI wrongdoers will be brought to justice.” In this rush to bring
indictments, “political considerations and public posturing have over¬
whelmed the merits of this matter.” The two men said they would hold
a press conference at their lawyers’ offices in Washington the following
day “to comment in person on these charges.”

Clark Clifford shuffled toward the podium in the crowded conference
room. Journalists perched on cupboards because of the crush of people
as the eighty-five-year-old lawyer blinked before the banks of lights
and television cameras that faced him. He and Robert Altman were
fifteen minutes late for their 10:00 a . m . press conference, ensuring that
most of the stragglers had arrived at the Washington office of Skadden,
Arps, Slate, Meagher & Flom, a stone’s throw from the Treasury
Department.

Wearing a gray pinstripe suit, white shirt, and striped tie, every curl
of his snow-white hair in place, Clifford presented the immaculate
figure of the elder statesman. “I wish to thank you for being present
here this morning,” he began in his clear, deep voice. “It demonstrates
a wish on your part to have a fuller understanding of this case rather
than just what one reads about the charges that have been brought.”
The system itself is biased, Clifford explained to his hushed audience.
“I have felt that there is a gross unfairness in the manner in which the
publicity about a criminal proceeding is brought,” he continued. “The
indictments are filed, the next day the papers are filled with the
government’s charges, and then, after a mere denial by the defendant,
weeks, months, and sometimes even years go by before you ever get to
hear about what the defense is in the case.”

That, Clifford said, was why he and Altman had decided to call this
press conference. “We wish as quickly as possible here to bring to your
attention the other side of the case,” he said as Altman and their
lawyer, Carl Rauh, sat impassively behind him. Surprisingly, Robert
Bennett, the lawyer who had taken the most visible role in defending
Clifford and Altman, had decided to remain on vacation in Montana.

Clifford insisted that he and Altman weren’t at all overwhelmed by
the “nature of the publicity this morning and the amount of attention

FALSE PROFITS

410 )

given to it.” The plain fact, Clifford said, was that “neither the district
attorney in New York nor the Justice Department in Washington has
any direct, credible evidence of our participation in any wrongdoing.”
The prosecutors, Clifford said, had found neither witnesses nor docu¬
ments to support their case, despite “the fact that for over a year the
most massive investigation has gone on that many have ever seen.”
The investigators, he said, raising his voice for emphasis, have found
“not one scintilla of direct evidence of proof, either oral or in writing.”
The prosecution has two approaches, he said: either that he and Alt¬
man were willing partners in a criminal endeavor with BCCI or that
First American’s management was indeed controlled by BCCI and that
the two lawyers were aware of that fact.

In time-honored fashion, Clifford told the story of his involvement
with BCCI: how he had met Abedi and represented the banker’s Arab
clients, “men with excellent reputations, men of fabulous wealth”
from the Middle East. Abedi appeared respectable, able, and soft-
spoken, Clifford said, and “seemed to be what he pretended to be.”
Clifford helped Abedi’s associates take over First American and, in
1982, decided to accept the “challenge” of becoming chairman of
the board despite his seventy-five years. During his tenure, Clifford
said, he had received only an annual compensation of $50,000. The
bank didn’t even assign a car to him for five years, Clifford explained,
and then only “because people began to lose faith in my driving
ability.”

First American had done well under his management, Clifford
averred, growing by billions of dollars in assets. It had done so well
that — after consulting with the holding company board — he and
Altman had bought some of the company’s stock. They sold it two
years later, at a fair profit. “You’ve seen a great many numbers, greatly
inflated numbers,” Clifford told his audience; all he had really ended
up with was “a profit of something like $2.6 million.” These profits, he
argued, were only fair rewards for a job well done. He quoted senior
Federal Reserve officials, including the former head of banking super¬
vision, William Taylor, to show that they hadn’t found any evidence of
BCCI’s influence on First American, as prosecutors now alleged.

Clifford said he would have given almost anything to have been
warned of BCCI’s criminality and to have avoided unwittingly becom¬
ing involved with it. But now he vowed that he would clear his name,
despite his advanced years. “I have not even begun to fight,” he de¬
clared defiantly as he brought his fluent presentation to a close. As he

Rounding Up the Suspects ( 411

moved back to sit down beside Rauh, the glow disappeared from
Clifford’s face. He was once more a tired old man.

Altman quickly followed his mentor to the podium. “Deals,” he
charged, “have been made with true scoundrels” by prosecutors trying
to gain information. All the direct evidence, however, Altman claimed,
“establishes our innocence.” The government had to twist events, he
maintained, to obtain even the circumstantial evidence it planned to
use against the two lawyers. The case, he argued, “should disturb
decent Americans” as “anyone, and particularly prominent, well-
known people, had become fair game” for prosecutors. “We shall fight
to the end to clear our good names,” Altman concluded, echoing
Clifford’s sentiments, if not his exact words.

Neither man offered any reply to the questions shouted at them by
some of the assembled journalists. “Did you tell the Federal Reserve
about your borrowings from BCCI?” yelled one persistent reporter.

Rauh quickly stood up. These investigations, he said, had been “a
brutal ordeal” for Clifford and Altman, yet they had always sought to
cooperate with the government. This was especially courageous of
Clifford, Rauh said, because of his age and his “very poor health.”
Rauh said that Clifford suffered from “severe coronary disease” and
has “90 percent blockage in three coronary arteries and a 70 percent
blockage in a fourth.” Because of his age and infirmity, Clifford “very
much wants the opportunity to be vindicated before he dies” and
“hopes to have an immediate and speedy trial here in Washington.”

More shouted questions greeted these remarks, but Rauh simply
said, “We will have no questions and no questions will be answered.”
The hungry media would have to make do with prepared statements
from Clifford, Altman, and sundry lawyers, officials, and First Ameri¬
can bankers who seemed to support their arguments. A joint statement
from Clifford and Altman claimed that the Justice Department’s case
was “contrived” and that Morgenthau’s office had “adopted an old
trick — throw everything against the wall in the hope that something
sticks.”

Although Clifford and Altman insisted that the case against them was
based on flimsy evidence, the reality was that investigators for the
Manhattan district attorney, the Justice Department, and the Federal
Reserve had obtained a great deal of damaging information about the
two lawyers. Some of it was laid out in the indictments and in the
Federal Reserve order of July 29, 1992. But there was also other

FALSE PROFITS

412 - )

information that had not been released publicly, including statements
from dozens of witnesses who were familiar with the relationship
between BCCI and First American.

One such witness was Riaz Saleem Aslam, the former financial
adviser to Sheikh Zayed with direct personal knowledge of the take¬
over. Aslam, as we have seen, accused Zayed and assorted BCCI
officials of wrongdoing in the takeover. He also alleged that Clifford
and Altman were accomplices and that their complicity dated back to
late 1977, just weeks after the takeover attempt began.

Aslam believed that the Washington lawyers had urged Zayed to
keep him in prison because they were fearful of what he could say
about their conduct. He noted that they had been BCCPs principal
U.S. lawyers until October 1990 (when Zayed replaced them with
Patton, Boggs & Blow). During that period, according to Aslam’s
attorney, BCCFs lawyers wrote “memos to Zayed’s Department of
Personal Affairs to press for his continued incarceration.” The same
month the Clifford firm was dropped, Aslam was freed.

Zayed played an integral role in the founding of BCCI, according to
a statement Aslam claimed to have written in 1983. When the institu¬
tion was established, “Zayed was probably the largest single share¬
holder and also provided a large subordinated loan to augment the
small capital of the bank.” Much of BCCFs capital, however, was
“internally created” by coopting bank loans and deposits and with
fraudulent accounting entries. The sheikh supported BCCI “by placing
long-term deposits with it” that were “far in excess of what a normal
investor would have considered prudent.”

The sheikh was intimately involved in Abedi’s attempt to acquire
Financial General (as First American was then called), according to
Aslam. It was understood at the outset that Abedi would control the
banking company. One of Zayed’s motives, Aslam said, was to in¬
crease his political power in the United States. “Mr. Abedi never
concealed his intent to control FGB as the effective arm of BCCI,” he
wrote, “which [Abedi] said would benefit the Ruler both through
ownership of BCCI and direct ownership of a Washington D.C. bank,
especially if this could result in a mutually profitable relation with a
close confidant of the President of the United States” — a reference to
Bert Lance.

Abedi and his associates lied to regulators about the identity of the
investors, and Zayed went along with the deception, according to
Aslam. The initial stock purchases in late 1977 and early 1978 had

Rounding Up the Suspects ( 413

ostensibly been made by Kamal Adham, Faisal Saud al-Fulaij, and
two of Zayed’s sons, Sheikh Sultan and Sheikh Mohammed. (Moham¬
med, a minor, supposedly acted through Aslam’s boss, Abdullah Dar-
waish, the chairman of the ruler’s Department of Personal Affairs.) In
reality, Aslam said, the stock was accumulated by Abedi and placed in
the names of the four investors. The real owners were Zayed and
BCCI.

Zayed’s pivotal role in the affair became apparent to Aslam after a
meeting in Pakistan in early 1978, during Lance’s visit. It was attended
by Zayed, Abedi, Lance, and advisers to the ruler, including Majid Ali
and Darwaish. According to Aslam, the meeting “was called by Abedi
to allow Sheikh Zayed to formally inform Darwish that certain shares
had been bought in FGL and that Darwish was to liaise with BCCI in
all matters relating thereunto. ”*

The collection of the stock had been handled clumsily. “Lance had
clearly inspired Abedi to act impulsively,” Aslam stated, “without
proper allowance” for U.S. securities laws. This was a reference to the
requirement that anyone who buys 5 percent of a public company’s
stock should file a disclosure statement with the Securities and Ex¬
change Commission; Abedi quickly exceeded that limit and failed to
make any filings.

Realizing his legally perilous position, Abedi retained Clifford’s law
firm. According to Aslam, this was done in December 1977 — not, as
Clifford has maintained, the following February, when the investment
group was sued by the banking company, f By late January 1978,
BCCI controlled about 17 percent of the stock, more than three times
the disclosure threshold. It became imperative to disguise BCCI’s con¬
trol of the stock — and its violation of securities law — by parceling
out the shares to four nominees.

Evidence of BCCI’s efforts to round up front men is contained in
documents unearthed by U.S. government investigators. For example,

*In his statements, Aslam spells the name of Zayed’s adviser as “Darwish” and the name
of Abedi’s deputy as “Naqui.” First American is generally referred to by its old name,
Financial General Bankshares, which is sometimes abbreviated as FGB or FGL. (The “L”
is for Limited, probably because Limited is used in corporate names in Aslam’s native
Pakistan.)

fAslam’s recollection jibes with new findings by Senator Kerry’s investigators. They
discovered an invoice sent to Abedi by Clifford’s firm which covers work done in January
1978. Moreover, the Abdus Sami telex mentioned in this chapter states that Sami had
retained Clifford in connection with the takeover. Financial General’s lawsuit was filed on
February 17, more than two weeks after the telex was sent.

FALSE PROFITS

4 M )

on January 30, 1978, BCCI’s Abdus Sami sent a telex to Abedi in
which he urgently requested “two other names immediately” in addi¬
tion to the two he already had, Adham and Fulaij. Abedi quickly came
up with Zayed’s sons Sultan and Mohammed. In a written statement
dated 1991, Aslam said, “The shares which were ultimately repre¬
sented as purchased by the two sons through BCCI had been allocated
to them as nominees for Sheikh Zayed, who purchased them with his
own knowledge, his own funds, and designated his sons as nominees
to keep secret his ownership.”

Clifford and Altman were accomplices in BCCI’s scheme to conceal
the true ownership of the stock, according to Aslam. In his words, they
helped Abedi “rectify the mistakes and guide the acquisition in confor¬
mance to U.S. regulation.” With their guidance, “a reorganized, al¬
though false, edifice of ownership of shares in FGB was created.” In
statements to the SEC and Financial General, noted Aslam, the owners
were “referred to as the ‘Arab investors.’ ” Disclosure statements filed
with the SEC stated that Mohammed and Sultan acquired close to 5
percent of Financial General on January 26, 1978. This, of course, was
four days before Sami asked Abedi to supply two more names. Either
Sami’s telex is wrong or the SEC filings are false.

After Financial General sued the four Arab “stockholders” (along
with Abedi and his associates), Darwaish had to go to Washington to
be deposed by lawyers for the banking company. Fie was extremely
anxious about the deposition, according to Aslam, and talked ner¬
vously about “the big guns” he would have to face. Clifford and
Altman did more than simply prepare him for the deposition, accord¬
ing to Aslam; they coached him on what to say.

In his 1983 statement, Aslam described one alleged coaching session
which, he said, took place in London in an apartment near Hyde Park.
“I recollect a meeting in the summer of 1978 held at Darwish’s (rented)
penthouse at the Quadrangle Apartments in London. The following
were present — A. H. Abedi, S. H. Naqui, Clark Clifford, R. Altman,
B. T. Lance, Abdullah Darwish, and R. Aslam.” The purpose of the
meeting “was to discuss strategy and bring Darwish up to date,”
Aslam wrote. “In practical terms Clifford and Altman coached Dar¬
wish extensively prior to his testimony, including times when I was
present.”

Aslam accompanied Darwaish to Washington. They were met at
Dulles airport by Dildar Rizvi, one of Abedi’s chief deputies, who was
involved in orchestrating the takeover attempt. “When Darwish went

Rounding Up the Suspects ( 415

to Washington D.C. in the fall of 1978 for his deposition, I accompa¬
nied him and was with him during his entire stay there except during
the actual taking of the deposition,” Aslam wrote.

There was additional coaching in Washington the week before the
deposition, according to Aslam. As a result, almost all of Darwaish’s
“testimony in the FGB actions was a reflection of what Clifford and
Altman wanted it to be rather than what had occurred in Darwish’s
knowledge,” Aslam said. “I specifically recollect [Darwaish’s] being
told to answer certain questions in a certain manner.” He added, “It is
my belief and in my knowledge that such answers are not true and I
can isolate them if given access to his deposition transcript.”

After his release from prison in 1990, Aslam saw a transcript of the
deposition and found numerous statements that he maintained were
false. Darwaish testified that he represented Mohammed and Sultan
separately, that he was Mohammed’s legal guardian, and that FGB
stock was purchased with Mohammed’s personal funds. All of this
was false, according to Aslam. Darwaish, he said, represented Mo¬
hammed only at Zayed’s explicit instructions, Darwaish’s only com¬
pensation was from Zayed, and Darwaish informed Mohammed
about the share purchases only after they had occurred. Darwaish also
stated falsely that Zayed did not have control over Mohammed’s
spending.

During the Washington visit in 1978, Aslam found further evidence
of Zayed’s prominent role in the takeover attempt. The UAE’s ambas¬
sador to Washington, Hamad al-Midfa, talked about “attempting
to manage the situation with the press” with regard to the takeover.
In Aslam’s view, the ambassador “could and would only have be¬
come involved with [the takeover attempt] at the direct instructions of
Zayed.”

Sheikh Sultan refused to cooperate with Abedi’s scheme, according
to Aslam; he was extremely upset that his name had been used in the
takeover. So, in the fall of 1978, it was arranged that Adham would
“buy” his Financial General stock. (Aslam believed that Clifford never
met Sultan or Mohammed, even though Clifford and Altman acted as
their attorneys.)

In his 1983 statement, Aslam said that throughout the takeover
battle, he had “strict instructions from Darwish” that the books of the
Department of Personal Affairs “should at no time reflect the purchase
of [Financial General] shares.” As a result, the DPA ensured that the
$10 million used to purchase the stock — ostensibly for Sheikh Mo-

FALSE PROFITS

416 )

hammed — was recorded on the books as “a deposit with BCCI
London.”

An important character in the illegal takeover was Zafar Iqbal,
according to Aslam. In 1978, he was the head of BCCE, the UAE
affiliate of BCCI in which Zayed held a controlling interest. (Iqbal
became BCCI’s chief executive in 1990.) According to Aslam’s 1983
statement, Iqbal doctored BCCI’s accounts to disguise the fact that the
ruler’s office had supplied funds through BCCI to acquire Financial
General stock. Aslam knew this from “discussions with Zafar Iqbal
and Shafquat Bokhari of BCCI, Abu Dhabi as well as S. H. Naqui (on
telephone only).” He said, “It is my recollection that certain fictitious
entries were made in the books to show (specifically in the case of Sh
Sultan’s ‘share purchase’) that the source of funds were different, i.e.
that he had provided the funds and not the D.P.A.” He added, “It is my
recollection that at least on two occasions Iqbal and/or Bokhari
showed [me] the statements that purported to show account relation¬
ships between DPA/Sultan/Mohammed on the one hand and BCCI on
the other. It is my specific recollection that such account statements
were false and did not reflect the correct state of the account relation¬
ship.”

Such account statements, of course, were created by BCCI to sup¬
port the false statements made in the SEC filings and court pleadings in
the United States. False money entries were even put through the
accounts and the dates of transactions were changed, Aslam said.
There were other reasons for the doctoring of accounts. BCCI wanted
to show that the sheikhs who invested in Financial General were not
indebted to BCCI. It also wanted to show that “the initial purchase of
shares had come from the sheikhs’ personal resources, whereas in fact
it was provided by the bank initially.”

In recent statements, Aslam has described how “the two sheikhs
[Sultan and Mohammed] routinely ran an overdraft account at BCCE,
under the approval of Zafar Iqbal and his deputy, Bokhari, which was
paid down from time to time by the DPA at the direction of Darwish.
Because of the questions about credit from BCCI and the need to
present a ‘clean slate’ these routine credits were altered on the record
presented.”

BCCI’s takeover of Financial General was completed in 1982
through nominees, according to Aslam. Discussing these front men, he
stated recently that “the guys didn’t have the money, most probably
didn’t know what was happening, and they just had their names used.

Rounding Up the Suspects ( 417

They probably didn’t even know their names were being used.” Al¬
though some of the shareholders were men of substance and wealth,
Aslam believed “that they would be hard put to come up with this size
of money for one investment, particularly as it had already been com¬
mitted to the U.S. authorities that their role in running [First Ameri¬
can] would have to remain strictly passive.” Aslam also doubted that
these investors had the expertise to make a judgment about acquiring a
bank holding company in the United States.

Aslam pointed out another important anomaly in the takeover of
First American. Darwaish, who was identified as one of the lead inves¬
tors from 1978 to 1982, had been arrested months before the acquisi¬
tion was consummated in the spring of 1982. U.S. regulators, particu¬
larly at the Federal Reserve, should have been aware of this. The ruler’s
investment committee, on which Abedi and Crown Prince Khalifa sat,
had made serious accusations against Darwaish in December 1981,
and he was soon arrested. In January 1982, the Abu Dhabi Investment
Authority sent telexes to fifteen major international banks saying that
Darwaish had been involved in a massive fraud against the ruler and
that the banks should not do business with him. By March, Zayed had
filed major lawsuits against Darwaish in Chicago and New York,
alleging fraud totaling about $100 million. Yet it was only after the
Washington Post reported Darwaish’s incarceration in August of that
year that the Fed’s general counsel, Michael Bradfield, wrote to Clark
Clifford to request information about the affair.

Clifford, Altman, and Sheikh Zayed have denied any wrongdoing
in connection with the takeover of First American. The Washington
lawyers say they were duped by BCCI. The ruler of Abu Dhabi claims
he was a victim of the bank. Nevertheless, it is impossible to dismiss
Aslam’s allegations out of hand. Although he is clearly an interested
party — having been jailed for several years by Zayed — he was a
witness to the takeover, and his story is consistent with what is now
known about it; much of it can also be corroborated with docu¬
ments and statements by other witnesses. Aslam could be a powerful
witness against Clifford, Altman, and other suspects in the BCCI
affair.

The trauma of Clifford and Altman coincided almost exactly with the
twentieth anniversary of the founding of BCCI. It was in the late
summer of 1972 that Sheikh Zayed agreed to back this new banking
venture. It was portrayed as an institution from the developing world

FALSE PROFITS

418 )

that would rival the biggest banks in New York, London, Frankfurt,
and Tokyo. Abedi’s vision proved extremely seductive to Zayed and
many others. For the Abu Dhabi ruler and other Arab potentates,
BCCI could serve as a vehicle to extend their influence. For Abedi and
his coterie of Pakistani financiers, it would provide an opportunity to
enter the world of international finance. For Clifford and Altman, a
relationship with BCCI meant millions of dollars and greater power in
Washington. For these men and many others, BCCI had become a
nightmare.

Epilogue

Agha Hasan Abedi seldom gave interviews to journalists, but he
made an exception in late 1982, when he agreed to sit down with a
writer for Institutional Investor, a New York financial magazine.
Abedi’s willingness to talk at that time is understandable, for 1982 had
been a glorious year. In just ten years, BCCI had become a global
financial empire, with offices in fifty-eight countries and assets of $8.5
billion. It was believed to be the fastest-growing bank in the world.
That same year, Abedi had achieved an enormously impressive coup in
the United States when he had secretly acquired control of First Amer¬
ican Bankshares, which would soon become the largest banking com¬
pany in Washington, D.C.

The interviewer began by noting that some critics of BCCI said it
was “different” from other banks, and he asked Abedi about his
“philosophy of banking.” Abedi replied that BCCI’s was “the age-old
philosophy of banking; there is nothing new about it. Our greatest
concern, and our greatest desire, is to protect the interests of our
clients, the depositors.” When the interviewer suggested that this
didn’t sound very different, Abedi became more expansive: “There
have also been some more important objectives. We want to serve a
useful purpose, not only for our shareholders, but for our clients and
our staff, whom we call ‘the BCCI family.’ ” He also spoke of BCCI’s
moral dimension. It was the belief of Abedi and his colleagues that “no
material end can be achieved without a moral aspect behind it.”

Abedi, of course, was neither a successful international banker nor a
pillar of morality but one of the most successful con men in history. A
master illusionist, he could make his audience see things that did not

( 4i9 )

420 ) Epilogue

exist. In carrying out this deception, he paid an enormous amount of
attention to physical appearances. Whenever BCCI opened a new
office, Abedi showed little interest in its financial performance. Loca¬
tion and design were what mattered. BCCI’s branches had to be sleek,
modern, and tastefully appointed. When visiting one of his outposts,
says a former official, Abedi would make sure every detail was correct.
“He would go all the way to Zimbabwe and he would reprimand the
manager, saying, ‘I saw that chair in the reception area is broken.’ ”

Abedi was equally concerned about his own image. In order to be
accepted as a successful international financier he had to look the part,
so he purchased his suits at Bijan in New York, one of the most
expensive clothing stores in the world. “He was always impeccably
dressed,” says a colleague.

In conversation, Abedi would discourse on subjects ranging from
international trade and economics to world politics and Third World
development. A Pakistani banker recalls meeting him for the first time
in the 1970s, when there was widespread talk of establishing a “new
world economic order” to help developing countries. Abedi, says this
man, used all the right buzzwords: “He appeared to be more of a
diplomat than a banker. I was totally impressed.” Soon afterward he
applied for a job with BCCI.

Within BCCI, the “Founding President” was the object of a person¬
ality cult. Outsiders were impressed as well. Abedi was a man of
tremendous charm, which helps explain why so many powerful people
were drawn to him. Jimmy Carter seems to have been mesmerized by
Abedi, talking about him almost as if he were a religious figure.

Abedi’s most important props, however, were not the fancy
branches, expensive suits, or financial jargon, but wealthy Arab
friends who pretended to be BCCI shareholders. In using these men,
Abedi skillfully manipulated the expectations and beliefs of his audi¬
ence. BCCI appeared on the financial stage at a time when hundreds of
billions of petrodollars were beginning to flow to Arab nations. News¬
papers, magazines, and television screens were filled with images of
“oil sheikhs” in flowing robes, Midases of the desert who had accumu¬
lated wealth beyond the dreams of ordinary mortals. If men like this
were behind BCCI, it had to be a solid institution. When the deception
was exposed, BCCI turned out to be an artfully contrived fake, with
front men posing as stockholders, nonexistent capital, and profits
manufactured out of thin air. It was an optical illusion, a mirage in the
desert. BCCI was the bank that never was.

Epilogue ( 421

When BCCI was seized in July 1991, Abedi was a pathetic figure. He
was fragile physically and his mind appeared to be cloudy. But his
decline had begun more than three years earlier, in early 1988, when he
suffered severe health problems. His physical deterioration mirrored
that of his bank. Without his ability to charm Sheikh Zayed and other
longtime supporters, Abedi found it harder to perpetuate the BCCI
illusion. The bank and its creator crumbled together.

The founder of BCCI has been living out his days in quiet seclusion
behind the high walls of his compound in the wealthy Clifton sec¬
tion of Karachi, Pakistan. Crippled by a series of coronaries and kept
alive with a transplanted heart, he has been confined to a wheel¬
chair. His wife, Rabia, and a group of servants attend to his needs.
Although Rabia has generally shielded him from media attention,
she made a few remarks to reporters after the closure. “My hus¬
band has lost everything,” she said. “He lost his health, his bank, his
dream, everything he worked for. And now people say he is to be
blamed.”

When Abedi was asked to comment on the July 1991 indictment in
New York, he insisted that he was innocent. Speaking through his
wife, he said, “The truth will ultimately prevail. I have full faith in
God. He’s always guided me.”

The cost of Abedi’s deception has been enormous. Robert Morgenthau
has called the BCCI affair the biggest bank fraud in history. At its
height, BCCI had more than $20 billion in deposits, and all of that
money had been collected fraudulently. Many customers, of course,
pulled their money out before the seizure, causing BCCI’s total liabili¬
ties to shrink by about half. Nevertheless, an incredible $9.5 billion
was lost or stolen.

Not all of this money will be lost, however. After the liquidation of
assets, contributions by Sheikh Zayed, and restitution by some of the
culprits, depositors will get back a portion of their money — perhaps
as much as a third. That will still leave enormous losses, however, that
will be borne by depositors. BCCI had nearly a million customers
when it was closed, many of them people of modest means from
developing countries.

Indeed, one of the saddest aspects of the BCCI affair is that it was a
hoax on thousands of people from impoverished countries who be¬
lieved in the bank, including BCCI employees who had nothing to do
with the bank’s misconduct. It was a source of pride that an institution

4iz ) Epilogue

owned and run by people from the Third World could become a major
force in international banking, an industry dominated by banks from
industrial nations. Beyond that, BCCI managed to convince a great
many people that it was a force for good because it supported such
ventures as Global 2000 and the Third World Foundation. The reality,
of course, is that BCCI ravaged developing countries by collecting
flight capital, bolstering dictators, and fostering corruption. In Nigeria
alone, BCCI drained hundreds of millions of dollars in hard currency
out of the country through illegal dealings in the foreign exchange
market.

In the industrial countries, depositors will suffer large losses in only
a few places. Britain is one example, mainly because of the bank’s
heavy penetration of immigrant communities. In addition, several lo¬
cal government bodies in the UK had large deposits at BCCI.

In the United States, Federal Reserve officials have stressed that
BCCI was forbidden to take retail deposits, implying that Americans
have lost nothing. This is highly misleading. BCCI did take deposits at
its foreign offices — and, in some cases, at domestic branches — from
American individuals, companies, and government agencies. In addi¬
tion, BCCI employees in the United States engaged in an illegal tele¬
marketing scheme to collect retail deposits, some of which came from
U.S. residents.

BCCFs victims also include American taxpayers. Two U.S. financial
institutions in which BCCI invested through Ghaith Pharaon — Cen-
Trust Savings Bank and Independence Bank — have collapsed, at a
huge cost to taxpayers. The failure of CenTrust would not have been
as catastrophic if the regulators had not been fooled by the Cen-
Trust/BCCI bond-parking scheme into prolonging the life of the sav¬
ings bank. BCCI, in short, contributed to one of the worst savings and
loan failures in history.

Beyond the direct financial consequences are many other costs that
are harder to quantify. Through its involvement in money laundering,
BCCI promoted the trade in illegal drugs, which has been a scourge on
the United States and other countries. BCCI was an accomplice in
other forms of crime, including investment fraud, terrorism, and illegal
arms trafficking. There is considerable evidence that its involvement in
the arms trade extended to nuclear weapons technology.

Perhaps most important, BCCI’s practice of coopting and corrupt¬
ing public officials helped to undermine the institutions that are sup¬
posed to protect the public, including law enforcement agencies and

Epilogue ( 423

central banks. Former BCC 1 officials have told investigators about
payoffs to government officials in a long list of countries.

But corruption is not the only explanation for the failure of these
institutions. The scandal exposed incredible negligence by those who
should have been policing BCCI. Confidence in bank regulators had
already been undermined by a series of shocks to the system, including
the debt crisis of the early 1980s in developing countries and, later, the
savings and loan scandals.

The credibility of audits and auditors has also been battered. Since
late 1989, Price Waterhouse has played a vital role in helping the
regulators and prosecutors expose BCCI’s crimes. But why did it fail to
detect the rampant fraud at BCCI for so many years before that? Why
did the firm sign BCCI’s unqualified financial statements for 1989 —
after it learned of widespread misconduct? Is corruption part of the
answer? The Manhattan district attorney and Britain’s Serious Fraud
Office are now investigating the possibility that former Price Water-
house officials received payoffs from BCCI.

The bank’s malevolent influence extended even to the interrelated
worlds of foreign policy, espionage, and covert action. BCCI was
involved in manipulating American foreign policy to benefit its politi¬
cal patrons in Pakistan and the Middle East. Western intelligence
officials who could have exposed its political activities preferred in¬
stead to use the bank for their own purposes.

The collapse of BCCI is by no means the end of the story. The painful
denouement will continue for many more years. Some of the victims
will be partially compensated and some of the villains will be pun¬
ished. Although prosecutors, investigators, and journalists are strug¬
gling to understand what happened, many mysteries, inevitably, will
never be solved.

Who is ultimately responsible for the scandal? Abedi, of course, was
clearly the principal culprit. He conceived BCCI, founded it, recruited
the nominee shareholders, built its international network, and pre¬
sided over the institution when it began robbing its own depositors.
But Abedi did not act alone.

A small group within the bank helped him siphon billions of dollars
out of the institution through fraudulent loans and other schemes,
then covered up the looting. Others assisted in the covert takeovers of
companies and financial institutions. Still others specialized in cultivat¬
ing rich and powerful people — using flattery, favors, bribes, prosti-

424 ) Epilogue

tutes, and other inducements — in an effort to amass deposits and
political power.

Outside the bank, Abedi was assisted by financial backers, front
men, propagandists, and influence peddlers. Some of BCCI’s most
important allies were political figures and government officials. Of¬
ficials of Arab nations were among the most important accomplices in
the multibillion-dollar Ponzi scheme and the covert takeovers of U.S.
financial institutions.

Sheikh Zayed and many of his associates — including relatives,
members of the ruling families of other emirates, financial advisers,
and UAE officials — have been accused of acting as front men in BCCI
and several of its satellites. Although spokesmen for Zayed have de¬
nied that he was involved in wrongdoing, it is hard to accept these
professions of innocence as long as Abu Dhabi authorities continue to
withhold vital witnesses and documents from investigators. Until there
is full cooperation from Abu Dhabi, it will be impossible to say
whether Zayed was the biggest victim, as he claims, or one of the
biggest villains.

There is also increasing evidence that members of the Saudi Arabian
elite — including close associates of King Fahd — were involved in
orchestrating BCCI’s frauds and looting the bank. After all, two of the
central figures in the scandal — Kamal Adham and Khalid Bin Mah-
fouz — are among the most powerful people in Saudi Arabia.

And there are strong indications that BCCI was just one of several
financial institutions looted by associates of Abedi’s. The Bin Mah-
fouz family’s National Commercial Bank seems to have been under¬
mined by fraud. In the BCCI Ponzi scheme, a large portion of the
stolen deposits came from Feisal Islamic Bank in Cairo, a institu¬
tion whose controlling shareholders include members of the Saudi
royal family. New evidence has emerged linking BCCI to the BNL
affair. In late 1992, investigators learned that Mohammed Ham-
moud, the BCCI front man, had borrowed millions from the Italian
bank.

BCCI’s most important allies in the United States were Clark Clifford
and Robert Altman. Although they claim that they were deceived by
the bank, they now stand accused of helping BCCI commit some of its
most serious crimes.

The federal and state indictments of Clifford and Altman touched
off a major legal battle in the summer and fall of 1992. Their lawyers

Epilogue ( 425

at Skadden, Arps insisted on a speedy trial in Washington on the
federal charges. Their preference for a federal trial was not surprising.
The federal indictment was narrower than the New York State indict¬
ment that Robert Morgenthau had secured, and the federal prosecu¬
tors were much less prepared than Morgenthau’s team. Moreover, if
the federal trial occurred first, there might never be a trial in New
York, since this could violate the New York law that forbids trying a
person twice for the same crime.

Skadden, Arps seemed to get its way when, on July 31, a federal
judge in Washington agreed to an October 2 6 trial date on the fed¬
eral charges. Defense lawyers confidently told friends that the New
York courts wouldn’t be able to schedule a trial until 1993 at the
earliest. They were in for a shock: on August 5, at a hearing in a New
York court, Judge John A. K. Bradley set a trial date of October 22,
1992 -

Defense lawyers and prosecutors traded barbs at Judge Bradley’s
hearing. John R Cooney, Jr., an attorney from Davis, Polk & Wardwell
who represented Clifford and Altman, told the judge that he would
probably soon ask the court to dismiss much of the case on jurisdic¬
tional grounds. Morgenthau, he said, had overextended himself and
his jurisdiction by bringing charges related to a worldwide fraud when
his authority extended only to New York. John Moscow, the prosecu¬
tor who had headed Morgenthau’s probe, accused the defense lawyers
of trying to delay the state’s case so that they could get to trial in
federal court first. “Quite frankly, I think they are trying to maneuver
this court and the court in Washington,” he said, arguing that Clifford
and Altman should face the broader state charges first.

Once again, it seemed, the Justice Department had fallen down on
the job. There had been no need for the federal prosecutors to agree so
hastily to a trial date. Was Justice really interested in getting to the
bottom of the BCCI affair? Or did it simply want to dispose of this
messy case quickly and quietly? The Wall Street Journal and the Wash¬
ington Post ran editorials saying that Clifford and Altman should be
tried in New York, by a prosecutor who was not part of the Washing¬
ton establishment.

The Justice Department quickly reversed itself. On August 18, at a
hearing in Washington before U.S. District Judge Joyce Hens Green,
federal prosecutors appeared to concede that the New York case
should be allowed to go first. Judge Green said she would rule on the
issue the following month. The day after the hearing, lawyers for

42 6 ) Epilogue

Clifford and Altman tried a countermeasure at a hearing in New York.
They said they had chosen new counsel for the New York trial* and
that the lawyers could not possibly be ready by October 22. The clear
implication was that the federal trial would have to come first. Judge
Bradley did not appreciate the maneuvering; he said he thought the
trial should still take place in New York and that he would discuss the
matter with Judge Green.

On September 10, Clifford and Altman arrived at the federal court¬
house in Washington to find out where they would be tried. After a
brief introductory statement, Judge Green announced her decision: the
trial would take place in New York, providing it began no later than
March 1993.

This was a devastating blow to Clifford and Altman, and they were
unable to conceal their shock. One year earlier, when they were grilled
by the House Banking Committee, they seemed remarkably cool. No
longer. Upon hearing the judge’s ruling, Altman buried his face in his
hands. When he left the courtroom with his wife, Lynda, they both
appeared shaken. Clifford was more composed, perhaps because his
health problems could enable him to avoid prosecution.

After the ruling, lawyers for Clifford and Altman tried to postpone
the trial in New York, but Judge Bradley refused. In late October,
Clifford’s lawyers said they would ask the judge to dismiss the case,
citing Clifford’s heart condition. It seemed increasingly likely that
Altman would stand trial alone.

As the trial date drew closer, investigators in Morgenthau’s office,
the Justice Department, and other agencies were continuing to gather
evidence. New criminal charges seemed inevitable, as well as supersed¬
ing indictments against some of the people who had already been
charged with crimes. The names of some Bush administration officials
had come up in grand jury testimony, raising the possibility that other
powerful people would be engulfed by the BCCI scandal.

One mystery in the BCCI affair that may never be solved is where the
money went. Some of BCCI’s losses have been explained, but billions
of dollars are still unaccounted for. Are there large caches of loot in
secret bank accounts controlled by Abedi and his close associates? Did

^Charles A. Stillman of Stillman, Friedman &£ Shaw would represent Clifford. Gustave
H. Newman of Newman tte, Schwartz was retained by Altman. (Both firms are in New
York.)

Epilogue ( 427

a large portion of the missing money go to some of the political figures
who helped the bank?

There is strong evidence that money was diverted to accounts con¬
trolled by Saudi and Abu Dhabi sheikhs. A New York grand jury has
already accused Khalid Bin Mahfouz of stealing as much as $300
million from the bank. BCCI and Capcom documents show that more
than $200 million went to accounts in the names of Kamal Adham and
Abdul-Raouf Khalil. Abedi also benefited, according to former associ¬
ates. A former BCCI official with ties to Pakistani intelligence says that
information on Abedi’s hidden wealth has been given to British inves¬
tigators by Bashir Choudhury, a BCCI officer in Naqvi’s special duties
department who is now in Pakistan. Choudhury, according to this
source, said that Abedi had salted away several hundred million dol¬
lars in Liechtenstein.

The whole issue of political corruption raises another set of ques¬
tions. How successful was BCCI in buying its way into the power
centers of the West? How did it use its influence? To what extent does
corruption explain the blindness and lethargy of the regulators and
law enforcement officials who failed to stop BCCI? It is already clear
that the Justice Department, the Federal Reserve, several powerful
members of Congress, and the CIA were reluctant to investigate this
scandal, even after it was exposed as the biggest bank fraud of all time.
President Bush has said little about the affair apart from criticizing Ed
Rogers, the former White House aide who was hired by Kamal Ad¬
ham. This silence is striking in view of Bush’s supposed commitment to
the war on drugs. After all, BCCI — which has been described as one
of the world’s biggest laundries of drug money — secretly owned a
major financial institution based just a few blocks from the White
House. The reluctance of powerful people to go after BCCI — or even
to talk about it — has helped to fuel suspicions about political corrup¬
tion.

The BCCI affair suggests that a criminal organization with enough
money and connections can buy its way out of trouble. Sadly, there are
few signs of reform. Influence peddlers like Clifford and Altman may
be in disgrace, but other political fixers continue to thrive. Anyone
who doubted that the system is intact had only to follow the 1992
presidential race. Both President Bush and his Democratic rival, Gov¬
ernor Bill Clinton of Arkansas, were surrounded by people with ties to
BCCI.

One evening at the Democratic convention in July could well have

42.8 ) Epilogue

been dubbed BCCI night. The speakers included Jimmy Carter and
Jesse Jackson, both beneficiaries of BCCFs largesse. The convention
was organized by Ronald Brown, the chairman of the Democratic
National Committee. One of the most important clients of his law
firm — Patton, Boggs & Blow — is Sheikh Zayed. Patton, Boggs also
manages a U.S. real estate portfolio for Zayed that is valued at about
$i billion/' Clinton’s campaign aides included at least two officials of
Hill and Knowlton, the PR and lobbying firm that represented BCCI
and First American.

For much of his political career, Clinton received substantial finan¬
cial backing from Jackson Stephens, the Arkansas investment banker
who helped to bring BCCI into the United States. In addition,
Stephens’s firm has given substantial legal work to the Little Rock law
firm in which Hillary Clinton, the governor’s wife, is a partner. Mrs.
Clinton even represented one of Stephens’s companies in a case related
to BCCI; in 1978, she did legal work for Systematics Inc. when it was
sued for its role in Abedi’s scheme to collect stock in First American. In
the 1992 campaign, Jackson Stephens himself was backing George
Bush, but many of his employees were writing checks for Clinton. A
study released in July found that employees of Stephens Inc. gave more
money to Clinton than employees of all but two other firms in the
entire country (Goldman, Sachs, a Wall Street investment banking
house, and Wilkie, Farr & Gallagher, a New York law firm).

Clinton’s ties to Stephens and the BCCI network attracted some
media interest during the campaign. What reporters didn’t discover,
however, was that Clinton’s association with Stephens was the subject
of an FBI investigation in 1992, according to government sources. The
purpose of the probe was, in part, to determine if Clinton was con¬
nected with BCCI. One investigator said he believed that the probe
might be politically motivated, instigated by Republicans who wanted
to undermine the Arkansas governor.

If Bush supporters were, in fact, behind the investigation, it would
be extremely ironic, in view of the president’s own ties to Stephens and
other BCCI associates. Those familiar with the BCCI story were re¬
minded of the bank’s connections with Republicans during the GOP

*Brown plays down his links to the law firm. He told the Wall Street Journal that he
has been “inactive” because of his commitments to the Democratic party, though he
continues to draw a modest amount of partnership income. Yet when the city of Washing¬
ton, D.C., selected Patton, Boggs as its new bond counsel in the summer of 1991, it made
the choice on the basis of a proposal submitted under Brown’s name.

Epilogue ( 429

convention in August. Before Ronald Reagan gave a speech, he was
introduced by former Senator Paul Laxalt, whose law firm represented
BCCI in the Tampa drug money case. The convention chairman, Craig
Fuller, had until early 1992 been the number-two man in the Washing¬
ton office of Hill and Knowlton. (Fuller joined the firm after the Tampa
case was over, but he was there when Hill and Knowlton worked for
First American.) Bush’s campaign press spokesman was James Lake,
who served simultaneously as a lobbyist and PR man for Sheikh
Zayed. Lake was rewarded handsomely for portraying the sheikh as
an innocent victim of the BCCI affair; in just two months in the fall of
1991, Lake’s firm received more than $200,000 in fees. 51 '

BCCI’s powerful friends also include many people with connections
to the intelligence world. Were intelligence agencies — including the
CIA — involved in covering up BCCI’s crimes or even committing
them?

The CIA seems to have protected BCCI and its backers for well over a
decade. When, for example, the Federal Reserve looked into the back¬
grounds of the BCCI clients who were seeking permission to buy First
American, it received “no adverse information on the investors” from
the CIA, according to J. Virgil Mattingly, Jr., the Fed’s general counsel
The CIA, said Mattingly, did not inform the Fed that two of the
investors — Kamal Adham and Abdul-Raouf Khalil — were foreign
intelligence liaisons of the United States. Paul Volcker, the former
chairman of the Fed, told a Senate committee in 1991 that when the
takeover was approved, he “wasn’t aware” of Adham’s intelligence
background.

In 1986 — four years after the takeover — the CIA issued a poten¬
tially explosive report stating that BCCI was involved in drug traf¬
ficking and that it secretly owned First American. This report was not
given to the Federal Reserve, as we have seen, but it did go to other
federal agencies, including the Treasury Department, where it appar¬
ently made no impression. Interestingly, the Treasury aide responsible
for circulating the report, Douglas P. Mulholland, had come to the
department in 1982 from the CIA — at the suggestion of its director,

*It would be impossible to list all of the direct or indirect ties, but one additional
example is worth noting. The chairman of the Republican National Committee, Richard
N. Bond, was a lobbyist for President Eric Arturo Delvalle of Panama from 1985 to 1988;
Bond was paid $10,000 a month. BCCI’s customer Manuel Noriega was, of course, the de
facto ruler of Panama at the time, and he forced Delvalle out of office.

430 ) Epilogue

William Casey. In 1987, Mulholland left the government to work on
Bush’s presidential campaign. After the election, Bush appointed him
assistant secretary of state for intelligence and research.

The CIA — and its allies — may even have assisted the bank in
connection with the Tampa drug money case. Prosecutors who
worked on the case say that they did not receive a single CIA report,
even though some of the reports alleged that BCCI was involved in
money laundering — the principal charge against the bank.

Various CIA allies have been involved in the campaign of lobby¬
ing and disinformation, aimed at squelching the investigations of the
bank, after the Tampa indictment. BCCI was assisted by Hill and
Knowlton, whose Washington office was headed by Robert Gray, a
man with close ties to U.S. intelligence.

Larry Barcella, one of the lead defense lawyers in the Tampa case,
was apparently quite sensitive to the interests of the U.S. intelligence
community during his days as a federal prosecutor. Two of his cases
could have been highly embarrassing to American intelligence agen¬
cies: his investigation into the murder of the Chilean dissident Orlando
Letelier by agents of the Pinochet dictatorship and his probe of Edwin
Wilson, the renegade CIA agent who sold arms to Libya’s Qaddafi.
One potential embarrassment in the Letelier case was that many of
Pinochet’s security agents had been trained by the Americans. In the
Wilson case, there have been allegations that many of his activities
were sanctioned by the U.S. government. Barcella even assisted in the
Reagan administration’s efforts to supply the Nicaraguan contras. In
1985, he gave a legal opinion relating to the sale of arms to the contras
by private individuals. Barcella says he was asked by someone at the
Pentagon to give the opinion, but he declines to identify the individual.
His former boss, former U.S. Attorney Joseph diGenova, told a re¬
porter that “Larry was sought out by a lot of people in intelligence”
and law enforcement because he was “creative.”*

Orrin Hatch, a forceful defender of the plea bargain, had served on
the Senate Intelligence Committee. The Utah Republican has had in¬
triguing ties to the CIA’s biggest covert operation of the 1980s: aid to

*In early 1992, Barcella began working on a congressional investigation of “October
Surprise.” According to this conspiracy theory, Reagan campaign aides persuaded the
Iranian government not to release American hostages before the November 1980 election
because it would help Carter win. In exchange, the Reaganites supposedly agreed to sell
arms to the Iranians. Several people linked to the alleged conspiracy had ties to U.S.
intelligence, including William Casey.

Epilogue ( 431

the Afghan rebels. In 1986, Hatch visited China with senior Reagan
administration and CIA officials to try to enlist the support of the Chi¬
nese government. BCCI, of course, was also involved in the operation.

Since mid-1991, the federal official with overall responsibility for
the BCCI case has been Attorney General William R Barr. Like so
many other characters in the drama, he has connections with the
intelligence world. Before becoming a lawyer, Barr spent four years as
an employee in the general counsel’s office of the CIA.

The cover-up of the CIA’s involvement with BCCI has continued
into 1992. When Senator Kerry’s staff looked into the CIA’s ties to the
bank, the agency repeatedly stonewalled. First, it claimed that it had
no information on BCCI. When it finally agreed to talk, it provided a
briefing officer who specialized in narcotics issues and who had no
special knowledge about the bank or the people behind it. When one
of Kerry’s staff members asked a question about Kamal Adham, the
CIA officer replied, “Who’s he?” In subsequent months, according to
the Senate investigators, the agency provided misleading and, in some
cases, patently false information.

The CIA’s hostility to Kerry’s inquiry is not at all surprising when
one considers that BCCI was involved in some of the most sensitive
intelligence operations of the Reagan-Bush years, including the secret
sales of arms to Iran. When questions were raised about the CIA’s ties
to BCCI after the shutdown of the bank, spokesmen for the agency
insisted that its hands were clean. “Any allegations of unlawful use of
BCCI by the agency are without foundation,” the CIA said in a press
statement. Its inspector general carried out an investigation which, he
said, cleared the CIA of misconduct.

Characteristically, these statements sidestep some of the most im¬
portant questions. The issue is not merely how the CIA used the bank
but what it knew about BCCI and its backers and why it failed to blow
the whistle on this criminal organization. Why did the CIA fail to tell
the Federal Reserve about Adham and Khalil — the Saudi intelligence
officials — when they were taking over First American? Why was none
of the CIA’s information about BCCI passed on to the prosecutors in
Tampa?

Adham and his associates were involved in other activities that the
CIA should have known about. They were major shareholders in
Capcom, which developed intimate ties to the men who control Tele¬
communications Inc. (TCI), the giant cable TV company. Capcom
was also an important vehicle for the looting of BCCI. It is hard to

43 2 ) Epilogue

believe that the CIA knew nothing about these activities, in view of its
close ties with the Saudis. Khalil, according to some sources, was even
on the CIA payroll until 1990. Speaking through his lawyer, Khalil
denies working for the CIA, but he wouldn’t comment on whether he
works with the agency.

Congressional investigators and others familiar with BCCI have
their own theories about the CIA’s conduct. There are strong suspi¬
cions that the agency wanted to protect an important intelligence asset.
As Norman Bailey, the former National Security Council official, put
it, the CIA was not interested in “blowing the BCCI cover.” There is
another alarming possibility: some investigators believe that a portion
of the money stolen from BCCI’s depositors was used to finance covert
operations sponsored by the U.S. government. If BCCI’s frauds were
exposed, this source of funds would dry up.

There are even indications that CIA officials were involved in the
founding of BCCI. One former officer of the bank recalls a conversa¬
tion he had in the early 1980s with a close associate of Abedi’s, a
Pakistani who had worked for United Bank and then joined BCCI
when it was established. The Pakistani said that Abedi had worked
with the CIA during his United Bank days and that the CIA had
encouraged him in his project to launch BCCI, since the agency real¬
ized that an international bank could provide valuable cover for intel¬
ligence operations. The Pakistani mentioned one U.S. intelligence of¬
ficial by name: Richard Helms, the director of the CIA until early
1973. Helms, as we have seen, later became a legal client of Clark
Clifford’s and a business partner of two BCCI insiders. “What I have
been told,” says this source, “is that it wasn’t a Pakistani bank at all.
The guys behind the bank weren’t Pakistani at all. The whole thing
was a front.”

If the CIA was indeed involved in founding BCCI, covering up
its frauds, and even using the stolen money, the implications are fright¬
ening. It would mean that an agency of the United States government
not only failed to protect the public from BCCI but was a partner in
crime.

The BCCI deception lasted for nearly two decades. Not until 1988
were serious efforts made to peel off Abedi’s mask and reveal the true
nature of the man and his bank. Even then, three more years would
pass before the criminal organization known as the Bank of Credit and
Commerce International was put out of business.

BCCI’s crime wave lasted as long as it did because of an appalling

Epilogue (433

breakdown in the systems of control that are supposed to protect the
public. With few exceptions, board members, auditors, bank regula¬
tors, and law enforcement agencies behaved with extraordinary blind¬
ness, lethargy, naivete, and timidity. In several cases, these watchdogs
were not fools but knaves: in exchange for money, favors, jobs, and
other forms of largesse, they looked the other way.

Abedi’s skills as a corrupter were honed in countries like Pakistan
and Abu Dhabi where rules, laws, and regulatory procedures are easily
bypassed by those who are willing and able to make payoffs to the
right people. Many people from “developed” countries like to believe
that this sort of corruption rarely occurs in Western cultures. Ameri¬
can schoolchildren, for example, have been taught that the United
States is a nation of laws, not of men, and thus utterly different from
autocracies like Abu Dhabi where all power flows from the ruler. Such
sharp — and oversimplified — distinctions may provide comfort to
Westerners, but they make it far too easy to put much of the blame for
the BCCI affair on foreigners who come from “morally backward”
societies. One man who has expressed that view is Paul Warnke,
a partner in Clark Clifford’s law firm. When Clifford was indicted,
Warnke said, “The problem is that he was involved with a culture he
did not understand. He had no background in the Middle East. He
didn’t recognize their values are different from ours.”

But are Westerners really so different from people in developing
nations — or just a bit more subtle? When Abedi wanted to expand in
the United States, he did more or less what he would have done in
Pakistan, Nigeria, or Indonesia: he linked up with the best friend of the
head of state. When he ran into legal and regulatory problems, he
hired politically connected lawyers to guide him through the govern¬
mental maze. When BCCI was charged with laundering drug money,
Abedi’s successors spent millions of dollars on lawyers, lobbyists, and
PR men and managed to win a favorable settlement of the case. Even
after the guilty plea, the bank was defended by prominent political
figures — several of whom had profited financially from their ties to
BCCI.

The sons of Sheikh Zayed engaged in highly suspect financial trans¬
actions with BCCI. But what about the sons of President Bush? George
W. Bush and his brother Jeb were both associated with people in the
BCCI network. George, of course, profited handsomely from an oil
deal that involved a long list of people with ties to BCCI.

In Washington — just as in Karachi, Abu Dhabi, and Riyadh —
money can buy influence. The most obvious manifestation of this, of

434 ) Epilogue

course, is political campaign financing. It is instructive that when
Senator Kerry’s investigation posed a serious threat to BCCI, Clifford,
Altman, and two of their law partners suddenly opened their check¬
books and contributed to Kerry’s reelection campaign. Kerry has said
that he did not solicit the donations, and there is no sign that he was
influenced, but it is hard to believe that this was not the intention.

BCCI was eventually put out of business, but that does not mean
that “the system worked,” as the saying goes. The system failed to
work for years. It was only through the efforts of a handful of dedi¬
cated people — including Robert Mazur, Jack Blum, and especially
Robert Morgenthau — that BCCI’s criminal rampage was finally
ended. If it were not for these men, the bank might still be in business
today, laundering criminal money, stealing deposits, and corrupting
governments.

The day after the indictments of Clifford and Altman were an¬
nounced, Senator Kerry’s committee held a hearing on BCCI in which
corruption was a recurrent theme. The senator began by criticizing the
government of Abu Dhabi for withholding documents and witnesses
from Western investigators and strongly suggested that Sheikh Zayed
and other Abu Dhabi officials had failed to cooperate because they did
not want their own role in the scandal exposed. Two bankers who had
been convicted in the Tampa case testified that day. Akbar Bilgrami
described how the bank made payoffs to African officials. Amjad
Awan spoke of his dealings with Noriega.

After the hearing, Kerry returned to his office and talked with a
visitor about the importance of political influence in the BCCI affair.
Four years earlier, he said, Clifford came to his office and vouched for
BCCI. “Clifford sat right on that sofa and said, ‘BCCFs a good bank.’
He said, c We’re anxious to be cooperative, we’ve never done anything
wrong.’” Kerry also touched on the pernicious influence of campaign
contributions. “The amount of money that floats around this city is
grotesque,” he said. When asked if anyone could be relied on to
protect the public, he said, “Only good people — the Robert Morgen-
thaus — people who see their duty and do it.”

The system in which BCCI flourished is intact. Many government
officials are still for sale to the highest bidder, enabling monied crimi¬
nal interests to buy what they want in Washington and other capitals.
Unless there is serious reform, there will be more scandals like BCCI,
perhaps with more devastating consequences.

Epilogue (435

Many aspects of the BCCI affair will remain shrouded in mystery
forever. We will certainly never know the name of every government
official corrupted by BCCI. Nor will we ever learn the full story of how
BCCI’s complicated frauds were committed. Many records were fal¬
sified or simply destroyed; in numerous cases cash transactions were
never recorded.

There will, however, he fresh revelations in the months and years to
come. Robert Morgenthau and other investigators are continuing their
probes and may well seek further indictments. New information will
also emerge in the trial of Robert Altman, scheduled to begin in early
I 993 -

Of one thing there is no doubt: amorality and contempt for the law
were at the very core of Agha Hasan Abedi’s empire. “The only laws
that are permanent are the laws of nature,” he used to tell his minions.
“Everything else is flexible.” For nearly twenty years, Abedi and his
accomplices were able to live above the law. In the end, this essential
lawlessness led only to destruction.

Acknowledgments

We would like to thank our respective employers — Dow Jones & Com¬
pany, publisher of the Wall Street Journal; and the Investigative Group Inc.
(IGI) — for giving us time to pursue this project. Without their help and
cooperation, this book would not have been possible.

In particular, we are grateful to the Journal's current managing editor,
Paul Steiger, his predecessor, Norman Pearlstine, and the Washington
bureau chief, Albert Hunt, as well as the deputy managing editor, Byron
Calame, all of whom gave their blessing and support to this book and
generously granted Peter his leave of absence. We would also like to thank
especially Peter’s colleagues and friends Tom Petzinger and George Anders
for their comments, suggestions, and editing. So many people at Dow
Jones helped us that it would be impossible to name them all, but we
particularly want to thank Jill Abramson, Marcus Brauchli, Nicholas
Bray, Geraldine Brooks, John Bussey, William Carley, Bob Davis, Dave
Dolinger, John Fialka, Craig Forman, William Hoover, Jonathan Moses,
Walt Mossberg, Alan Murray, Tom Ricks, Johnnie Roberts, Allanna Sulli¬
van, Clayton Wiggins, and Allison Wright.

At IGI, Terry Lenzner, the chairman, and Jim Mintz, the president,
generously agreed to give Larry a leave of absence so that the book could
be completed. Other colleagues were helpful and supportive in a variety of
ways, including Ron Cesar, Mike Fellner, John Hanrahan, Bob Mason,
and Jeff Nason. John and Jeff reshuffled the work to make the leave
possible. Ron, Mike, and Bob took over cases. Thanks also go to Bill
Regardie, who courageously resisted attempts to kill the First American
article commissioned by his magazine, and Brian Kelly, the former editor
of Regardie's. Bill Hogan, a former senior editor, provided invaluable
assistance and moral support for both the article and this book.

We would like to thank the many people we have worked with at

( 43^ )

Acknowledgments ( 437

Houghton Mifflin. John Sterling, the editor in chief of the trade books
division, was unfailingly supportive throughout the project, providing us
with valuable suggestions, enthusiasm, and even our title. Luise Erdmann,
our manuscript editor, was always a joy to work with. We also appreciate
the skills and efforts of Gordon Brumm, Anne Chalmers, Chris Coffin,
Dan Maurer, Katya Rice, Becky Saikia-Wilson, Barbara Williams, and
Irene Williams.

This book would not have been possible without the efforts of Rafe
Sagalyn, our agent, who has sung our praises from Anaheim to Tokyo. We
were further assisted by Alex Kramer, an able researcher, and Karen Huntt
Mason, a skillful and patient picture editor. Thanks go to Jim Condon,
Marco Herrera, and Dan Ion of the Journal's graphics department for
preparing the maps and chart. Several friends and colleagues helped in
various ways, including Scott Armstrong, Tino Bakker, Bill Barnes, Ste¬
phen Ellis, Nick Fielding, Pascal Henry, Larry Lifschultz, Feruccio Pe-
tracco, and Steve Pizzo.

We have been helped by countless sources in our reporting on BCCI
over the past several years and in the research for this book, as evidenced
by our source notes. Many of these people — including several former
BCCI officers — cannot be mentioned by name, but we thank them all.

We also want to thank Jacqueline Veldhuis, Larry’s wife, who graciously
let the book take over the Gurwin-Veldhuis home for days, weeks, and
months.

October 1992
Washington, D.C.

Appendix

Chronology

1922 Agha Hasan Abedi is born in Lucknow, India.

1945 Clark Clifford joins Truman’s White House staff as a junior naval
aide. In 1946, he becomes special counsel to the president, leaving
in 1950 to establish a law firm in Washington.

1946 The rajah of Mahmudabad, India, recommends Abedi for a job
with Habib Bank in Bombay. He is hired as a clerk.

1947 The Indian subcontinent is partitioned and Habib Bank transfers
its headquarters to Karachi, in the new country of Pakistan. Abedi
moves with the bank.

1959 Pakistan’s Saigol family establishes United Bank and installs
Abedi as president.

1963 Saudi Arabia’s intelligence service is established, headed by Kamal
Adham, a brother-in-law of Crown Prince Faisal, who becomes
king the following year.

1966 Sheikh Zayed bin Sultan al-Nahyan overthrows his brother
Sheikh Shakhbut to become the ruler of Abu Dhabi, the largest
component of a British protectorate known as the Trucial States.
Around this time, Abedi meets Zayed, and a close relationship
soon develops.

Ghaith Rashad Pharaon, whose father is an adviser to King Fai¬
sal, establishes Saudi Research & Development Corporation
(REDEC).

( 438 )

Appendix ( 439

1968 In January, Clifford becomes secretary of defense in the Johnson
administration and serves for one year.

1971 Robert A. Altman joins Clifford’s firm after obtaining his law
degree at George Washington University.

Zulfikar Ali Bhutto comes to power in Pakistan, nationalizes
United Bank, and arrests Abedi and other bankers.

December: The Trucial States gain independence as the United
Arab Emirates (UAE), with Sheikh Zayed as president.

1972 Abedi establishes BCCI. Its most important backers are Sheikh
Zayed and Bank of America.

1973 BCCI opens its first branch, in London. London soon becomes the
bank’s de facto headquarters, although BCCI is incorporated in
Luxembourg (and later establishes a holding company in the Cay¬
man Islands).

BCCI and Bank of America establish a joint venture bank, Na¬
tional Bank of Oman.

October: Egypt and Syria attack Israel, starting the Yom Kippur
War. Abu Dhabi soon becomes the first of several Arab nations to
declare an embargo on oil exports to the U.S. as punishment for its
support of Israel. Over the next few months, OPEC quadruples oil
prices.

December 31: BCCI’s total assets are $200 million.

1975 Robert M. Morgenthau takes office as Manhattan district attor¬
ney.

First Arabian Corporation, a company partly owned by Pharaon
and Adham, takes over Detroit’s Bank of the Commonwealth.
They are assisted by the Houston law firm of John Connally, a
former treasury secretary and a presidential aspirant. (Pharaon
sells his stock in 1977.)

In January, T. Bertram (“Bert”) Lance becomes president of Na¬
tional Bank of Georgia (NBG), a subsidiary of Financial General
Bankshares (FGB), a bank holding company based in Washington,
D.C. In June, Lance and other investors acquire control of the
Atlanta bank from FGB.

1975- Acting through Abbas Gokal, a Pakistani businessman, BCCI

1976 attempts to acquire Chelsea National Bank, in New York City.

440 )

Appendix

The state banking department vetoes the deal because of concerns
about BCCI’s role.

1976 Altman becomes a partner in Clifford’s law firm.

Bank of America, alarmed at BCCI’s rapid growth and dubious
practices, declines to invest new capital in the bank.

BCCI establishes ICIC (Overseas) Ltd. in the Cayman Islands.

Banque de Commerce et de Placements (BCP), a BCCI affiliate,
opens in Geneva.

January: George Bush becomes director of the CIA and serves for
one year. He strengthens the agency’s ties with “friendly” Arab
intelligence agencies.

Fall: General George Olmsted, who controls FGB through Inter¬
national Bank and other entities, begins looking for a buyer after
the Federal Reserve rules that he must sell control of FGB. Lance is
approached but declines, apparently because of his plans to join
the Carter administration.

1977 January: Jimmy Carter takes office as president. Lance, who as¬
sisted in the campaign, is appointed director of the Office of
Management and Budget. During Carter’s presidency, Clifford
serves as a special emissary to such countries as Turkey, Cyprus,
and India.

March: Bhutto’s party wins the general election. It is later alleged
that Abedi channeled between $2 million and $3 million to
Bhutto’s party; the money is believed to have come from Sheikh
Zayed. Bhutto’s government allows investors close to BCCI to
acquire a large stake in the Pakistani unit of Attock Oil.

April: A group of investors led by J. William Middendorf II ac¬
quires a large stake in FGB. Middendorf soon becomes chairman
and president. Dissident members of his group soon begin schem¬
ing to oust him and to sell control of FGB to others. One member
of the group is Jackson Stephens, an investment banker in Arkan¬
sas with ties to Lance and Carter.

May: The Carter administration proposes the sale of F-i 5 fighters
to Saudi Arabia. The Senate approves the deal one year later.

July: General Mohammed Zia-ul-Haq overthrows Bhutto and
becomes Pakistan’s dictator. The Zia regime permits associates of
BCCI to acquire a majority of Attock Oil’s Pakistani unit. The

Appendix ( 441

investors, who are front men for BCCI, include Adham, Pharaon,
Abdullah Darwaish (an adviser to Sheikh Zayed), and Faisal Saud
al-Fulaij, a Kuwaiti businessman.

September: Adham steps down as Saudi intelligence chief; he is
succeeded by his nephew Prince Turki bin Faisal al Saud. Both
men are BCCI stockholders.

Connally invests in Houston’s Main Bank with Pharaon and Kha-
lid Bin Mahfouz, whose family controls National Commercial
Bank, the largest bank in Saudi Arabia.

September j: Carter asks Clifford to represent Lance in connec¬
tion with the Senate’s investigation into Lance’s banking practices.

September 21: Carter announces Lance’s resignation as budget
director.

October-December: R. Eugene Holley, a Georgia politician, in¬
troduces Lance to Abedi, who retains Lance as an investment
adviser. Abedi arranges for Pharaon to acquire Lance’s stock in
National Bank of Georgia. Lance and some of his associates then
persuade Abedi to buy a large block of stock in Financial General
Bankshares. Abedi agrees, and they assist him in acquiring the
stock. One of those involved is Jackson Stephens. The ostensible
purchasers are four BCCI clients: Adham, al-Fulaij, and two sons
of Sheikh Zayed, Sultan and Mohammed, with the latter acting
through Zayed’s financial adviser Darwaish.

December 31: BCCI’s total assets reach $2.2 billion. It touts itself
as the fastest-growing bank in Britain and one of the fastest-grow¬
ing in the world.

1978 January 4: Lance sells his controlling stake in NBG to Pharaon,
who is acting as a front man for BCCI. Abedi arranges for the
repayment of Lance’s biggest debt, about $3.5 million owed to the
First National Bank of Chicago.

Late January: Bank of America announces that it will be disposing
of its BCCI stock over the next few years.

February 7: Lance informs FGB’s chairman, B. F. Saul II, and its
president, Middendorf, that he represents investors who own
about 20 percent of FGB’s stock.

February iy: FGB sues Lance, Abedi, BCCI, the Arab investors,
and others, alleging an illegal takeover attempt.

442. ) Appendix

February 27; Joseph E. Vaez, a bank examiner in the Office of the
Comptroller of the Currency, submits a report on BCCI that
highlights serious irregularities and potentially grave financial
problems.

March 13: Abedi’s Third World Foundation applies for registra¬
tion as a charity in Britain.

March 17; The Securities and Exchange Commission (SEC) files
suit against BCCI, Abedi, Lance, Stephens, and others, alleging
securities law violations in the purchases of FGB stock. With
Clifford’s assistance, the suit is settled with a consent agreement
the next day. The investors agree to make a tender offer for all
outstanding stock. Clifford and Altman advise the investors dur¬
ing the ensuing takeover battle.

April: A federal judge finds that BCCI, Abedi, and the four Middle
Eastern investors acted as a group when they collected stock in
FGB, which means they should have filed disclosure statements
with the SEC.

June 18 and July 3 1: The Wall Street Journal publishes articles on
Boeing’s questionable payments to Arab middlemen, including
Adham. Sheikh Zayed was involved in one deal.

October 18: Sheikh Sultan, one of Zayed’s sons, sells his FGB
shares to Adham.

October 20: Richard Helms provides advice to the chairman of
one of the dummy companies set up to acquire FGB.

1979 BCCI acquires Hong Kong Metropolitan Bank; it is later renamed
Bank of Credit and Commerce (Hong Kong) Ltd.

BCCI establishes Bank of Credit and Commerce (Nigeria) Ltd.

January / 19: King Khaled of Saudi Arabia announces the sacking
of Adham from his post as a royal adviser for having supported
the Carter administration’s Camp David initiative.

February 11: The shah of Iran is overthrown by followers of the
Ayatollah Khomeini.

February 16: The Fed rejects a bid by BCCI’s clients to acquire
FGB.

March: Israel and Egypt sign a peace treaty at the White House.
Adham assisted the Carter administration in bringing Egypt to the
negotiating table.

Appendix ( 443

April: Bhutto is executed in spite of appeals to Zia from world
leaders to spare his predecessor’s life. The U.S. suspends economic
and military aid to Pakistan; the reasons include the execution of
Bhutto and Zia’s refusal to halt efforts to build a nuclear bomb.

April 27: The Wall Street Journal reports that Fulaij was bribed by
Boeing, according to U.S. investigators. (He denies it.)

May 23: Lance and three business associates are indicted by a
federal grand jury in Atlanta on charges of violating banking laws.
Lance pleads not guilty and is eventually acquitted.

November: Muslim fundamentalists seize the Grand Mosque in
Mecca, Saudi Arabia.

Dece?nber: The Soviet Union invades Afghanistan, prompting the
Carter administration to channel substantial amounts of aid to
Pakistan and to the Afghan resistance. BCCI later becomes in¬
volved in the CIA’s efforts to assist the Afghan rebels.

980 January: Clifford visits India as Carter’s envoy.

April: The Bank of England tells BCCI that it does not merit the
status of a “recognised bank” and can only call itself a licensed
deposit taker.

April 11: Ernst & Whinney qualifies BCCI’s 1979 accounts. The
auditors were concerned about inadequate provisions against pos¬
sible loan losses in Iran.

July: Bank of America completes the divestiture of its BCCI
shares.

July zj: Adham and the other Arab investors win a definitive
agreement with FGB’s board that allows them to acquire the
company. The takeover must be approved by bank regulators.

September 22: War breaks out between Iraq and Iran; it will last
for eight years. During the war, BCCI finances arms purchases by
both sides.

October: The first issue of South magazine is published. It is
heavily subsidized by BCCI.

981 Abedi sets up the BCC Foundation in Pakistan and names Zia’s
top adviser, Ghulam Ishaq Khan, as chairman.

January 20: Ronald Reagan takes office as president.

March 12: The Office of the Comptroller of the Currency says in a

444 ) Appendix

letter that if the FGB takeover goes through, “BCCI will have no
involvement with the management and other affairs of Financial
General.”

April 23: The Fed holds an informal private hearing to review the
proposed acquisition of FGB. Clifford and Altman represent the
BCCI clients who want to buy it. Four of the investors — Adham,
Fulaij, and two associates of Adham’s (Abdul-Raouf Khalil and
Sayed Jawhary) — testify at the hearing.

August 25: The Fed approves the application by BCCFs clients to
acquire FGB.

October 16 and 23: Britain’s New Statesman magazine publishes
the first major expose of BCCI. The writer, Tariq Ali, alleges
political payoffs and other wrongdoing.

October 28: The Senate votes to allow the sale of AWACS to Saudi
Arabia.

1982 The Panamanian strongman Manuel Antonio Noriega begins
banking with BCCI/Panama.

March 2: The New York State Banking Board approves the BCCI
clients’ application to acquire New York banks owned by FGB,
although one of the banks will have to be divested.

April 19: The Arab investors announce that their tender offer has
been successful: they have acquired 96 percent of FGB’s outstand¬
ing common stock.

Before and after the tender offer, top management positions and
the composition of the board are reshuffled. Clifford is chairman,
Stuart Symington is vice chairman, and Robert G. Stevens is
president (serving until 1989). Altman is a board member of FGB
as well as president of FGB Holding Company (later renamed
First American Corporation), which owns all of Financial Gen¬
eral’s stock and is in turn owned by foreign dummy companies.

June: Fahd bin Abdel-Aziz al-Saud becomes king of Saudi Arabia.

August: FGB changes its name to First American Bankshares.
Lance introduces Abedi to Carter. Soon afterward, Abedi donates
$500,000 to the Carter Presidential Center. BCCI will later con¬
tribute millions to Carter’s projects.

December 31: BCCI has grown to 262 offices in 58 countries.
Total assets are $9.6 billion.

Appendix ( 445

1983 David L. Paul acquires Miami’s Dade Savings and Loan and re¬
names it CenTrust Savings Bank. It soon becomes the biggest S&L
in the Southeast.

BCCI acquires Colombia’s Banco Mercantfl and later renames it
Banco de Credito y Comercio Colombia.

BCCI acquires Spain’s Banco de Descuento and renames it Bank of
Credit and Commerce S.A. Espanola.

BCCI forms Bank of Credit and Commerce (Emirates), a locally
incorporated unit in the UAE, to evade a new law limiting to eight
the number of branches allowed foreign banks.

1984 Capcom, a commodity futures trading company, is founded in
London. Its controlling shareholders are close associates of BCCI,
including Adham, Khalil, and Jawhary. Other major shareholders
include Bob Magness, the chairman of Tele-Communications Inc.
(TCI), the biggest U.S. cable TV company, and his protege, Larry
Romrell. Both join the board of directors, with Romrell as chair¬
man. Capcom becomes a vehicle for the looting of BCCI.

January 29: Altman marries Lynda J. Carter, an actress who por¬
trayed Wonder Woman on television.

October 4: Clifford tells the First American board that his goal is
for First American to become one of the twenty largest banking
companies in the country within ten years.

1985 August: The Comptroller of the Currency charges Lance with
check kiting, receiving the proceeds of nominee loans from Cal¬
houn First National Bank, and obtaining money from the bank’s
credit life insurance company.

October 1: Pharaon acquires Independence Bank of Los Angeles
for $23 million as a front man for BCCI.

November 29: The Nigerian government signs a secret agreement
with BCCI for a $1.25 billion financing. Interest and principal
payments are to be made in oil.

December: Pharaon’s company REDEC declares a moratorium on
principal payments on its debts.

1985- BCCI claims it incurred losses of $225 million in options trading

1986 during this period. A purported capital infusion of $150 million
helps to calm the concerns of auditors and regulators. BCCI of¬
ficers later say that the real losses totaled almost $440 million.

44 6 ) Appendix

Syed Ziauddin Ali Akbar, the head of BCCI’s treasury division,
takes the blame and resigns to become managing director of
Capcom in 1986.

BCCI helps Adnan Khashoggi finance sales of arms to Iran, which
are part of the Reagan administration’s Iran-contra dealings.

1986 Pharaon reportedly sells all of his BCCI stock.

Global 2000, a charitable organization, is founded by Carter.
BCCI becomes the largest single donor.

February: Lance reaches a settlement with the Comptroller of the
Currency, agrees to pay a $50,000 fine, and is barred from work¬
ing for any federally insured bank without permission from the
regulators.

March: Pharaon’s company REDEC halts interest payments on its
debts.

June 3: BCCI says its 1985 net income plunged by 21 percent, to
$158 million, from $201 million the previous year. Ernst & Whin-
ney, the auditor of BCCI Holdings (Luxembourg) S.A., later re¬
signs after disagreements over the accounting for the bank’s losses.
Price Waterhouse, which previously audited BCCI’s Cayman Is¬
lands holding company, takes over the whole BCCI audit.

June: Saudi Arabia’s Bin Mahfouz family acquires large stakes in
BCCI and First American. Khalid Bin Mahfouz joins BCCI’s
board of directors.

July: BCCI’s Tokyo branch opens.

The U.S. Customs Service’s Tampa office begins Operation C-
Chase, an undercover investigation aimed at catching launderers
of drug money.

September 30: The CIA circulates a report to the State, Treasury,
and Commerce departments alleging that BCCI acquired control
of First American in 1982. The report is not given to the Fed.

October 1: The Carter Presidential Center is dedicated in Atlanta.
Among the major donors honored at the ceremony are Agha
Hasan Abedi, King Fahd of Saudi Arabia, Armand Hammer, and
Ted Turner.

November: First American’s parent company signs an option to
buy National Bank of Georgia.

Appendix ( 447

1986“ Clifford and Altman get nonrecourse loans from BCCI to buy
1988 stock in First American. They sell most of the stock after nineteen
months, reaping millions of dollars in profits.

1987 Carter visits Pakistan with Abedi and meets with President Zia. In
the spring, Carter and Abedi go on a world tour, with stops in
London, Hong Kong, Tibet, Peking, and Moscow, and meet with
the leaders of several countries.

TCI orchestrates a $560 million rescue of Turner Broadcasting
(which operates Cable News Network), leaving TCI the largest
single shareholder in Turner.

Abedi arranges for the Bin Mahfouz family to sell its BCCI stock.

February: An undercover Customs agent opens an account at
BCCI/Tampa. He later begins laundering drug money with the
help of BCCI officers.

March: First American agrees to acquire National Bank of Geor¬
gia from Pharaon for about $220 million.

July: Pharaon buys about one fourth of CenTrust Savings Bank as
a front man for BCCI.

The Fed approves First American’s takeover of NBG.

October 5: Pharaon’s REDEC signs a $340 million debt resched¬
uling agreement with its Western and Arab creditor banks.

1988 February 4: Federal grand juries in Miami and Tampa indict
Noriega for drug trafficking, laundering drug money, and provid¬
ing assistance to major drug traffickers in exchange for millions of
dollars in bribes. Around the time of the indictments, BCCI helps
Noriega to hide $23 million in European bank accounts.

February 8: Leigh Bruce Ritch, a convicted drug trafficker, tells a
Senate subcommittee chaired by John Kerry about his dealings
with Noriega. He also states that he and Noriega both used BCCI.
Ritch’s testimony, together with other information received by the
committee, prompts an investigation of Noriega’s ties to BCCI.
The probe is headed by Jack Blum of Kerry’s staff.

February 9: Abedi suffers a heart attack and undergoes a heart
transplant. Swaleh Naqvi takes over the running of BCCI.

May: The College of Supervisors — comprising bank regulators
from Britain, Luxembourg, Spain, and Switzerland — holds its
first meeting. The panel was established to improve the regulation

44 8 ) Appendix

of BCCI. Regulators from Hong Kong and the Cayman Islands
join in 1989, the United Arab Emirates in 1990, and France in
1991. The Federal Reserve never becomes a member.

July: As part of the Kerry Committee’s probe of Noriega and
BCCI, the Senate Foreign Relations Committee issues subpoenas
to the bank, demanding all records relating to Noriega. Clifford
and Altman represent BCCI before the committee.

August 17: Pakistan’s Zia dies when a bomb destroys his plane in
midair.

September 9: Amjad Awan, one of the BCCI officers who is a
target of Operation C-Chase, tells an undercover agent he sus¬
pects that BCCI secretly acquired control of First American and
National Bank of Georgia.

October 4: A federal grand jury in Tampa indicts BCCI, Capcom,
and ten current or former BCCI employees on charges of launder¬
ing drug money. These include Awan and the head of Capcom,
S. Z. A. Akbar.

October 8: Customs agents arrest five of the indicted bankers in
Tampa. Other defendants are arrested in Los Angeles, London,
and Paris.

October 11: The BCCI indictment is announced by U.S. Attorney
Robert Genzman and Customs Commissioner William von Raab
at a press conference in Tampa. Shortly afterward, Clifford and
Altman assemble a team of criminal lawyers to defend BCCI and
the individual bankers.

October 14: BCCI retains the public relations firm of Hill and
Knowlton to limit the damage to its image caused by the Tampa
indictment.

November: The political party of Benazir Bhutto, the daughter of
the late Pakistani leader, wins the national election. She soon
becomes prime minister.

Decefnber: An agent of the Internal Revenue Service informs the
Fed that BCCI secretly owns First American, according to one of
the bankers indicted in the Tampa case. Further information is
provided two months later. The Fed does little to check out the
allegation.

December 3/: BCCI has 417 offices in 73 countries and 1,300,000

Appendix ( 449

customers, with total assets of $20.6 billion. It is the seventh-larg
est privately held bank in the world.

1989 January 20: George Bush takes office as president.

February: The Federal Reserve Bank of Richmond gives BCCFs
relationship with First American a clean bill of health. The Fed
approves First American’s application to acquire Bank of Escam¬
bia of Pensacola, Florida.

March: Jack Blum persuades Amer Lodhi, a former employee of
BCCI and Pharaon, to meet with federal prosecutors in Tampa.
The informant says he believes that BCCI acquired control of First
American, National Bank of Georgia, and Independence Bank
through front men.

April: Blum, who had resigned from the Kerry Committee’s staff
at the end of March, meets with Manhattan D.A. Morgenthau.
After he provides information about BCCI, Morgenthau opens his
own investigation of the bank. A federal grand jury in Tampa
returns a superseding indictment against BCCI, alleging that laun¬
dering drug money was part of BCCI s corporate strategy.

June 12: The Fed issues an order against BCCI, requiring it to
implement better compliance procedures.

August: The FBI raids the Atlanta branch of Italy’s Banca Na-
zionale del Lavoro (BNL) and discovers that the branch has illeg¬
ally lent billions of dollars to Iraq. It is later discovered that BNL
had close ties to BCCI.

August 21: Morgenthau’s office tells the Fed that an informant has
reported that BCCI owns or controls First American through
nominees.

Fall: Bank regulators in Britain and Luxembourg ask Price Water-
house to conduct a special audit of BCCI. Based on findings by the
auditors, the Bank of England informs the Fed that several First
American shareholders had substantial loans from BCCI, secured
by First American stock.

December 13: The Fed asks Altman about BCCI’s loans to First
American’s shareholders.

December 20: American troops invade Panama.

I 99 ° January 3: Noriega surrenders to U.S. authorities. He is arraigned
the next day in federal court in Miami.

450 ) Appendix

January 16: BCCI agrees to plead guilty to money-laundering
charges in Tampa.

January jo: Harken Energy, a company in which President Bush’s
son George W. Bush is a major shareholder and a board member,
signs a highly coveted contract with the government of Bahrain.
Several people with connections to BCCI also have ties to Harken
or the Bahrain deal.

February i: Federal regulators seize CenTrust Savings Bank,
charging it with numerous violations of banking regulations. The
failure of CenTrust will cost taxpayers an estimated $2 billion.

February 5: A federal judge in Tampa accepts BCCI’s guilty plea,
places the bank on probation for five years, and requires it to
forfeit about $14 million. In a letter to the Fed, Altman asserts that
he does not have access to information about BCCI’s loans to First
American’s shareholders; he fails to mention the loans he and
Clifford received.

February 22: Senator Orrin Hatch, a Utah Republican, delivers a
speech on the Senate floor defending BCCI and the Tampa plea
bargain.

April: As the centerpiece of a rescue scheme, Sheikh Zayed agrees
to inject new capital into BCCI. Zayed and his associates increase
their ownership to 77 percent. Naqvi is replaced as chief executive
by Zafar Iqbal.

April jo: BCCI’s 1989 annual report is released; it contains a clean
opinion from Price Waterhouse, stating that the report gives a
“true and fair view” of the bank’s financial condition. The Wall
Street Journal reports that BCCI is expected to announce a huge
loss for 1989, about $500 million, and may move its headquarters
to Abu Dhabi. The bank soon confirms the loss and the move.

May: Regardie’s magazine publishes a cover story showing that
BCCI has close ties to First American, National Bank of Georgia,
and Independence Bank. On May 3, the Wall Street Journal pub¬
lishes a front-page expose of BCCI, characterizing it as a “rogue
bank.” On May 8, Altman meets with Fed officials and attempts
to discredit the articles.

June 19: BCCI announces 4,000 layoffs from its international
work force of 14,000.

July 29: A federal jury in Tampa finds five BCCI bankers guilty on

Appendix ( 451

charges of money laundering: Amjad Awan, Syed Aftab Hussain,
Akbar Rilgrami, Sibte Hassan, and Ian Howard. (Guilty verdicts
are later returned against S. Z. A. Akbar and Asif Baakza in
London. Nazir Chinoy later pleads guilty in Tampa.)

August 2: Iraqi forces invade Kuwait.

August 6: A BCCI ally, President Ghulam Ishaq Khan of Pakistan,
backed by the Pakistani military, dismisses Prime Minister Benazir
Bhutto, dissolves the National Assembly, and declares a state of
emergency.

September 20: BCCI moves its headquarters from London to the
UAE after refusing to release six-month financial statements.

October: Abedi and Naqvi are forced to resign from BCCI.

November: Nawaz Sharif, a BCCI ally, becomes prime minister of
Pakistan.

December: Morgenthau informs the Fed that an audit of BCCI
showed $854 million in loans to First American’s shareholders
using that bank’s stock as collateral.

1991 January 4: The Fed orders an investigation into BCCI’s alleged
control of First American. The Fed subsequently makes criminal
referrals to the Justice Department.

February 2 7: Saddam Hussein agrees to give up all Iraqi claims to
Kuwait. President Bush orders an end to the Gulf War.

February 28: The Justice Department announces the indictment of
BNL’s former Atlanta branch manager, Christopher Drogoul, and
other defendants. Drogoul is charged with fraud in connection
with BNL’s lending to Iraq.

March 4: The Fed accuses BCCI of illegally acquiring control of
First American, and BCCI agrees to give up its stake. The Bank of
England asks Price Waterhouse to conduct a special investigation
of BCCI, under Section 41 of Britain’s Banking Act.

May: The Fed says BCCI illegally owns Independence Bank and
orders it to sell its shares.

May j: The Washington Post reports that Clifford and Altman
earned millions of dollars on investments in First American stock
that were arranged and financed by BCCI.

May 22: Pamela Harriman, a fund-raiser for the Democrats, holds

451 ) Appendix

a party in Georgetown to celebrate the publication of Clifford's
memoirs, Counsel to the President. Several prominent Democrats
attend.

May 23; Fed officials testify to the Senate Banking Committee that
they were lied to for more than a decade about the ownership of
First American.

June: Price Waterhouse provides the Bank of England with reports
alleging widespread fraud at BCCI.

July j: Regulators in the U.S., Britain, Luxembourg, the Cayman
Islands, Spain, Switzerland, and France shut down BCCI. The
depositors face potential losses of billions of dollars. During the
next few weeks, reporters in various countries publish new revela¬
tions about BCCI, including information on its ties to intelligence
agencies and links to terrorism.

July 8: A court in Luxembourg discloses that BCCI lost more than
its entire net worth in 1990.

July 11: A retired Pakistani general, Inam ul-Haq, is arrested in
Germany after allegations that he helped procure materials for his
country’s nuclear program. BCCI was implicated in the alleged
scheme. He is later extradited to the United States and convicted
in July 1992,.

July 12: The Fed takes action against Abedi, Naqvi, Pharaon, and
Kamal Shoaib, the BCCI officer who ran Independence Bank.

July ly: The Wall Street Journal reports that a few senior BCCI
executives received $50 million in hush money.

July 22: British officials reveal that BCCI used First American’s
stock as collateral for loans used to cover up fraud at BCCI and
that the bank probably never made a profit in its nineteen-year
existence. The government of Britain’s Prime Minister John Major
asks Lord Justice Bingham to conduct a public inquiry of BCCI.

July 23: Robin Leigh-Pemberton, governor of the Bank of Eng¬
land, places the blame for the fraud at BCCI on its former execu¬
tives and asks Sheikh Zayed to protect its depositors.

July 29: Morgenthau announces that a Manhattan grand jury has
indicted BCCI, Abedi, and Naqvi. The Fed charges that BCCI
violated banking laws and assesses a $200 million fine. (The Fed
later lifts the fine so that BCCI will not be able to escape criminal
prosecution on the ground of double jeopardy.)

i99i-

I 99 2

* 99 2

Appendix ( 453

August 13: Clifford and Altman resign from First American.
Nicholas Katzenbach, a former U.S. attorney general and a friend
of Clifford’s, becomes chairman.

September y. The Justice Department announces the indictment
of Naqvi, five other BCCI officials, and Capcom on racketeering
charges. Congressman Charles Schumer of New York issues a
report criticizing the conduct of federal law enforcement agencies
in the BCCI case.

September 9: Plainclothes policemen arrest Naqvi and several
other BCCI officers at the bank’s main office in Abu Dhabi.

September 11: Clifford and Altman testify before the House Bank¬
ing Committee. They deny they knew about BCCI’s ownership of
First American.

September 13: The Fed’s general counsel, J. Virgil Mattingly, Jr.,
testifies that investigators are probing loans from First American
to former public officials.

September 17: BCCI board member Alfred Hartmann resigns
from the chairmanship of BNL’s Swiss subsidiary after the Wall
Street Journal reports his ties to both BCCI and BNL.

November: News organizations begin reporting on Senator
Hatch’s intriguing ties to BCCI.

November 15: The Justice Department announces the indictment
of BCCI, Abedi, Naqvi, and Pharaon. They are charged with
engaging in a racketeering conspiracy involving the illegal owner¬
ship of Independence Bank and 25 percent of CenTrust Savings
Bank.

December: BCCI’s liquidator reveals that about $9.5 billion has
been lost or stolen. (This is the difference between liabilities and
realizable assets.)

- BCCI’s liquidators plead guilty to all U.S. charges against the bank
and agree to forfeit all the bank’s U.S. assets, worth an estimated
$550 million.

January 30: The Federal Deposit Insurance Corporation seizes
Independence Bank.

February 28: The Justice Department announces the indictment of
CenTrust’s David Paul on fraud charges. He is accused of conceal-

454 ) Appendix

ing the savings bank’s true financial condition by parking $25
million in CenTrust junk bonds with BCCI.

April: Noriega is convicted by a federal jury in Miami.

June: Harry W. Albright, Jr., is appointed trustee for a majority of
the shares in First American. They were previously owned by
BCCI and Sheikh Zayed’s family.

June: BNL’s former Atlanta branch manager, Christopher Dro-
goul, pleads guilty to multiple counts of bank fraud in the BNL-
Iraq case. (In September, the plea agreement is canceled.)

July 1: A Manhattan grand jury indicts Khalid Bin Mahfouz on
charges that he stole $300 million from BCCI; charged with him is
his assistant Haroon Kahlon.

July 22: A Manhattan grand jury returns two sealed indictments
in the BCCI case. One accuses Abedi, Naqvi, Pharaon, and Fulaij
with participating in “enterprise corruption.” The other accuses
Abedi, Naqvi, Clifford, Altman, and Fulaij with participating in a
scheme to defraud.

July 2j: Adham and Jawhary plead guilty to New York charges
and sign cooperation agreements with the Manhattan D.A.’s of¬
fice and the Justice Department.

July 29: A federal grand jury in Washington returns a three-count
indictment against Clifford and Altman. It is announced simulta¬
neously with the Manhattan indictments returned seven days ear¬
lier. The Fed announces a detailed order alleging that Clifford and
Altman violated numerous banking regulations. Clifford and Alt¬
man plead not guilty to all charges.

September 30; The Kerry Committee releases an extensive report
on the BCCI affair.

October 22: A Luxembourg court approves a settlement of claims
by BCCI’s depositors. Zayed’s government is committed to pay
about $1.7 billion. Lord Justice Bingham releases his report on
BCCI; it is critical of the Bank of England and Sheikh Zayed’s
government.

DJIBOUTI

BCCI’s Main Offices

notes on Sources

This book has grown out of more than a decade of reporting on BCCI.
Gurwin published an article in the August 1979 issue of Institutional
Investor on Arab acquisitions of U.S. banks, which included information
on the First American takeover battle as well as Ghaith Pharaon’s invest¬
ments in banks in Detroit and Houston. Truell first wrote about BCCI in
1981 for the Economist Financial Report. After joining the Wall Street
Journal the following year, he published several stories on BCCI and
related matters. An article in the Journal's European edition in May 1986
disclosed that BCCI had suffered huge losses in options trading.

After BCCI was indicted on money-laundering charges in 1988, Truell
and Gurwin began intensive research on BCCI. Gurwin published three
articles on BCCI in the Economist and a lengthy cover story on the bank’s
ties to First American for the May 1990 issue of Regardie's magazine.
Truell has published scores of BCCI stories, including several exclusives,
for the Wall Street Journal , some of them in collaboration with other
Journal reporters.

It is impossible to mention all of the sources used in preparing this book.
The authors conducted hundreds of interviews, and many of the sources
would speak only on a not-for-attribution basis. These confidential
sources include law enforcement officials as well as former BCCI officials
who feared retribution. Other sources include auditors, bankers, bank
regulators, congressional staff members, defense lawyers, and employees
of various companies connected to BCCI (including Attock Oil, First
American, National Bank of Georgia, Independence Bank, and South
Publications).

Many people mentioned in the book did speak on the record to one or
both of the authors, including Tariq Ali, Robert Altman, Norman Bailey,
Sidney Bailey, E. Lawrence Barcella, Jr., Robert Bench, Robert Bennett,
Michael Bradfield, Hank Brown, Alberto Calvo, Clark Clifford, James F.

( 458 )

Notes on Sources

( 459

Dougherty II, Robert W. Genzman, Eddie George, Henry Gonzalez, John
Heimann, Mike Hershman, Pierre Jaans, Laurent Kasper-Ansermet, John
Kerry, Bert Lance, Frank Mankiewicz, Middleton A. (“Sandy”) Martin
III, J. Virgil Mattingly, Jr., David McKean, Robert Morgenthau, John
Moscow, Ghaith Pharaon, Masihur Rahman, Abdur Sakhia, Charles
Schumer, Jackson Stephens, the late William Taylor, William von Raab,
Lawrence Wechsler, and Jonathan Winer.

Thousands of pages of documents have been gathered and reviewed.
The most useful articles, broadcasts, and books are cited in the notes;
books are usually identified by the surname of the author. The following
abbreviations are used.

AP Associated Press

“BCCI Activities” “BCCI and Its Activities in the United States,” House
Banking Committee Minority Staff Report, September io, 1991. Re¬
printed in the record of the committee’s September 11, 1991, BCCI
hearing.

Burris Affidavit An affidavit for a search warrant by David H. Burris of
the Internal Revenue Service dated October 7, 1988. (Burris, who
worked on Operation C-Chase, sought court permission to search
BCCPs offices. This document contains a detailed summary of the
evidence obtained in the investigation.)

Church Committee The Subcommittee on Multinational Corporations of
the Senate Foreign Relations Committee was chaired by the late Frank
Church, a Democrat from Idaho. In the mid-1970s, this committee
conducted an investigation of the bribery of foreign officials by Amer¬
ican companies.

Fed The Federal Reserve
FT Financial Times

House Banking Chronology This chronology of the BCCI affair was
prepared by the majority staff of the House Banking Committee and
released at a hearing on September 11, 1991.

Kerry Committee The Subcommittee on Terrorism, Narcotics, and Inter¬
national Operations of the Senate Foreign Relations Committee,
chaired by John F. Kerry of Massachusetts.

Kerry Report The BCCI Affair. A Report to the Senate Committee on
Foreign Relations, from Senators John Kerry and Hank Brown (a
Colorado Republican), September 30, 1992.

LAT Los Angeles Times
L.G. Larry Gurwin

MEED Middle East Economic Digest, a magazine published in London
NYT Neiv York Times
P.T. PeterTruell
PW Price Waterhouse

Notes on Sources

460 )

Schumer Report Federal Law Enforcement's Handling of Allegations
Involving the Bank of Credit and Commerce International, a staff
report issued on September 5, 1991, by the Subcommittee on Crime
and Criminal Justice of the House Judiciary Committee. The report
was prepared at the direction of the chairman, Charles E. Schumer of
New York, and was not “reviewed or approved by other members of
the subcommittee.”

U.S. v. Awan et aL The money-laundering case against BCCI and several
employees announced by the U.S. attorney in Tampa in October
1988.

U.S. v. Noriega et al. The drug case against the former Panamanian
dictator and several other defendants. The indictment was announced
in early 1988.

Vaez Report A report on BCCI submitted by Joseph E. Vaez of the Office
of the Comptroller of the Currency on February 27, 1978, to Robert
R. Bench, the associate deputy comptroller for international banking.

WP Washington Post

WSJ Wall Street Journal

Prologue

The description of the arraignment of Clifford and Altman is based partly
on reporting by Tom Petzinger and Jonathan Moses of the WSJ.

Abdur Sakhia’s statements about Abedi are from his October 22, 1991,
testimony to the Kerry Committee. Calvo provided his description of
Abedi to the authors. The columnist William Safire compared Abedi to
Moriarty.

1: The Courtier and the Sheikh

The principal source for the fall 1972 gathering in Abu Dhabi is a written
statement by Riaz Saleem Aslam, a Pakistani who served as a financial
adviser to Sheikh Zayed. Information on Abedi’s early life and career is
drawn from interviews with former BCCI officials, press reports, and
Abedi’s March 8, 1978, deposition in Financial General Bankshares, Inc.,
v. Lance et al. Najam Sethi’s article was in the WSJ , July 29, 1991. Also
useful was a lengthy article on Abedi’s background by Steve Coll on
September 1, 1991, in the WP.

Sheikh Zayed is described in Kelly, Mosley, and Thesiger. (The Bousted
quote is from Mosley.) Baldwin Tuttle, an attorney for the BCCI clients
who took over First American, explained Zayed’s control of Abu Dhabi’s

Notes on Sources

( 4^i

resources in a November 5, 1980, letter to the Fed. Sakhia’s remark was
made in an October 7, 1991, interview with Kerry’s staff. Some of the
information on Carlson’s role in the founding of BCCI is from the LAT,
September 3,1991. Rahman’s remarks are from his August 8, 1991, Kerry
Committee testimony, a February 1992 article by Alan Friedman in Vanity
Fair, and Rahman’s August 7, 1991, interview with the Kerry staff. RT.
also conducted several interviews with Rahman.

2: The Network

Information on the early history of BCCI comes from former bank of¬
ficers, an article in the July 1978 issue of Euromoney, and Tariq Ali’s
articles for the New Statesman on October 16 and 23, 1981. Most of the
information on the branch network comes from BCCI’s annual reports.

The remarks about Abedi by former colleagues come from several
sources, including Vanity Fair, February 1992, RT.’s interview with Calvo,
and L.G.’s interview with Lozano.

Several people who attended BCCI’s annual conferences (employees and
others) described them in background interviews. Aslam, the former fi¬
nancial adviser to Zayed, provided some of the information on BCCI’s
role in managing the sheikh’s investments. Bilgrami talked about Zayed in
an interview with Kerry’s staff on July 13, 1992, and in his July 30, 1992,
Kerry Committee testimony.

Abedi’s explanation of BCCI’s ownership comes from his March 8,
1978, deposition in Financial General Banksbares, Inc., v. Lance et al.
Sani Ahmed’s remark about Abedi’s ambitions appeared in Newsweek on
August 26, 1991.

3: Coming to America

Several of the characters mentioned in this chapter were interviewed by
one or both of the authors, including Altman, Bailey, Clifford, Heimann,
Lance, Pharaon, and Stephens. Saul was interviewed by Keith Girard, a
writer for Regardless when L.G. was preparing his article on First Ameri¬
can. There were also off-the-record interviews, including one with a for¬
mer BCCI official who was familiar with Eugene Holley’s 1977 meeting
with Abedi. Other confidential sources included bank regulators and an
adviser to Financial General during the takeover battle.

Contemporaneous press reports were useful for the section on Lance-
gate, as was a profile of Altman by Harry Jaffe in the June 1991 issue of

462 ) Notes o?t Sources

Washingtonian. Lancegate was also mentioned in the memoirs of Carter,
Clifford, and Lance.

The Financial General takeover battle was covered thoroughly by the
WP and the (now defunct) Washington Star. Also useful were court papers
from the takeover litigation, notably the SEC’s complaint, Financial Gen¬
eral’s complaint, affidavits by Saul and Middendorf, and depositions of
several of the defendants, including Abedi, Adham, and Lance. In re¬
sponse to requests filed under the Freedom of Information Act, the Federal
Reserve released hundreds of pages of documents, including a transcript
of the April 23, 1981, hearing at the Fed as well as internal memoranda.

New information about the takeover has emerged in recent years as a
result of investigations by congressional committees and prosecutors. For
example, the Kerry Committee and the House Banking Committee have
released internal BCCI documents about the takeover battle. On Septem¬
ber 11, 1991, House Banking released a detailed chronology of the BCCI
affair, which lists many of the events in the takeover battle. Abbas Gokal’s
attempt to acquire Chelsea National Bank was described by Heimann in
May 23, 1991, testimony to the Senate Banking Committee and by a
confidential source to L.G.

Pharaon showed off the “Titian” during a meeting with P.T. in the
spring of 1990.

Clifford’s career as a “superlawyer” is described in Goulden, which also
lists most of the clients mentioned in this chapter. Gailey’s recollection of
Clifford appeared on March 21, 1991.

Boeing’s questionable payments were reported in the WSJ on June 28
and July 31, 1978, and April 27, 1979. The comment by Adham’s lawyer
appeared in a September 30, 1991, article by John Fialka in the WSJ.
Regarding the PLO, the governments of Saudi Arabia and the UAE openly
acknowledge that they have channeled substantial aid to the organization
over the years. It was in a July 1989 interview with L.G. that Altman
refused to comment on how such support jibed with his 1981 statement
that none of the investors in First American had been involved in support¬
ing terrorist groups. (The U.S. government continues to classify the PLO
as a terrorist group.)

4: The Underground Empire

Most of the facts and figures on the expansion of BCCI’s network are from
the annual reports. Information about BCCI’s ties with its satellites is
based largely on confidential interviews with BCCI officials, associates of
Ghaith Pharaon’s, and employees of Attock, National Bank of Georgia,

Notes on Sources ( 463

First American Bankshares, First American Bank of New York, Indepen¬
dence Bank, and South Publications.

REDEC’s debt rescheduling was covered by P.T. for the WSJ. Former
BCCI officials described in interviews in 1990 how BAII “fronted” for
BCCI in the Independence Bank takeover; they provided supporting docu¬
ments. (This transaction resulted in federal criminal charges against BCCI,
some of its senior officers, and Pharaon in November 1991. BAII has not
been accused of any wrongdoing.)

Altman said in a July 1989 interview with L.G. that First American’s
purchase of NBG was an “arm’s-length” deal. Clifford’s remarks appeared
in American Banker ; December 10, 1987. Pharaon’s were published in
Atlanta Business Chronicle, April 27, 1987. Altman’s deposition was
taken on June 23,1988, in Doris I. Sandberg et al. v. Virginia Bankshares,
Inc., et al, a suit filed by former minority shareholders of First American
Bank of Virginia in U.S. District Court in Alexandria, Virginia. The price
paid for NBG is from the Fed’s July 29, 1992, order.

Peter Becker’s profile of David Paul was published in M, Inc. in March
1991. The $2 billion estimate was made by bank regulators. The bond¬
parking scheme was first reported in the WSJ on May 3, 1990, in a story
by P.T. and John Fialka.

Clifford’s assertion that BCCI exerted no control over First American
was made at a September 11, 1991, hearing of the House Banking Com¬
mittee. The remarks about the “so-called shareholders” were made by a
top official of First American Bankshares, who spoke to L.G. on a not-for-
attribution basis. At the House Banking hearing, Clifford said that in the
thirteen years he and Altman represented BCCI, he made twenty-six trips
to London. Abedi’s role in hiring Richter was revealed in the WP, February
3, 1991; additional details are contained in the Fed order issued on July
29, 1992. Information on the extensive correspondent banking relation¬
ship is from “BCCI Activities.”

The terms of Afridi’s mortgage are contained in real estate records filed
in Westchester County, New York. A government investigator confirmed
that Elley was also granted a below-market rate on his mortgage. Altman’s
comments on the mortgages were made in a July 1989 interview with L.G.
Invitation lists for the conferences contain the names of several employees
of BCCI satellites. A number of these people have confirmed in interviews
that they attended, including Altman.

5: Friends in High Places

Abedi’s practice of supplying prostitutes to influential people has been
confirmed in interviews by several former BCCI employees as well as

Notes on Sources

464 )

others familiar with the bank. The detailed information about Begum
Asghari Rahim comes mainly from the Kerry Report.

The allegation that Abedi provided cash to Bhutto’s political party in
1977 is contained in a document entitled “White Paper on the Conduct of
the General Elections in March 1977,” issued in July 1978. The Attock
takeover was described in Tariq Ali's October 16, 1981, story for the New
Statesman and in confidential interviews with a former BCCI official.

The authors have a copy of the loan agreement for the $100 million
financing of Pakistan’s Rice Export Corporation. BCCI’s role in helping
Pakistan inflate its foreign currency reserves was described by Nazir Chi-
noy in his March 13, 1992, Kerry Committee testimony. Abedi’s close
relationship with Zia was confirmed by several former BCCI employees as
well as other sources. Lawrence Lifschultz and Zahid Hussain, a Pakistani
journalist, also assisted the authors.

The examples of Pakistani officials who went to work for BCCI were
provided by Zahid Hussain and former BCCI officials. When BCCI was
asked by L.G. in 1989 to confirm these examples, it declined to do so. A
spokesman would only confirm in general terms that it had hired several
former government officials.

Bert Lance's account of how he introduced Abedi to Carter is based on
Lance’s October 23, 1991, testimony to the Kerry Committee as well as
interviews with the authors. Most of the information about donations to
Carter’s projects was provided by the Carter Center. Khashoggi’s role in
paying for a fund-raising event is described in Kessler. Sasakawa’s unsa¬
vory background has been widely reported; the specific information in this
chapter is from the book by Anderson and Anderson.

Carter’s 1987 trip with Abedi was described by Kovach in the Atlanta
Constitution on June 29 and 30, 1987. The description of the BCCI jet is
from Vanity Fair , February 1992. The Kovach remarks quoted here ap¬
peared in the LAT, July 28, 1991.

Details of Young’s relationship with BCCI come from interviews with a
former BCCI official, press reports, and internal BCCI documents. The
payment of expenses for Young’s Middle Eastern trip is from Emerson,
citing the Atlanta Journal , March 23, 1983 . The Kerry Report states that
the loan balance reached $197,000 and that Young’s associate Stony
Cooks maintains this was offset by travel expenses. The report then points
out that Young would have to have traveled a tremendous amount for
BCCI to incur such large expenses. Young declined to answer questions
from the authors.

Pharaon’s practice of entertaining VIPs in Savannah was described by a
former associate of his and in press reports, notably an August 28, 1991,
article in the NYT. The Pharaon-Paul visit and subsequent donation were
described in the LAT, July 28, 1991.

Notes on Sources

( 465

Lord Callaghan mentioned his relationship with BCCI in a December 1,
1988, letter to a researcher for Bandung File , a program on Britain’s
Channel 4, which was preparing a feature on BCCI. It said, in part, that
“Mr Abedi had kindly volunteered financial assistance in my travel and
other arrangements.” Rahman’s quote on Callaghan is from Vanity Fair ;
February 1992. Ridsdale and Amery mentioned their financial ties to
BCCI in their parliamentary disclosure statements.

Virani’s relationship with BCCI has been widely reported in the British
press. A former BCCI official described in an interview with the authors
how Virani introduced bank officials to Conservative politicians.

Two former employees of South Publications provided information on
Gauhar’s activities, as did Lawrence Lifschultz in interviews with L.G.
Other sources included interviews with former BCCI officials, the Third
World Foundation’s application for registration as a charity (dated March
13, 1978), a 1987 brochure on the Third World Prize, and back issues of
South magazine and the Third World Quarterly. It was during a 1981
interview with L.G. that a BCCI official blamed the bank’s poor image on
racism and jealousy.

Abedi’s efforts to ingratiate himself with Zimbabwean politicians were
described by former BCCI officials in interviews with the authors, Bil-
grami’s July 30, 1992, testimony to the Kerry Committee, and Sakhia’s
October 22, 1991, testimony to the same committee.

BCCI’s efforts to operate in Singapore were reported by Marcus W.
Brauchli in the Asian Wall Street Journal on August 26, 1991.

BCCI’s Florida connections were discussed in Aziz Rehman’s October
24, 1988, deposition to the Kerry Committee. Sakhia provided additional
information in his public testimony to the committee. The party to launch
the regional office was described in the Economist , October 16, 1981, the
Miami Herald August 4, 1991, and the Kerry Report.

Information on the Washington representative office comes from inter¬
views with former employees, press reports, and correspondence between
BCCI and Clifford & Warnke. The $20 million figure is from a law
enforcement source. Abedi’s Third World bank scheme was described by a
former BCCI official in an interview with the authors. Qureshi’s 1991
interview was with P.T.

The estimate that nearly a third of Clifford & Warnke’s lawyers did
work for First American was contained in a WSJ article by Jill Abramson,
October 4, 1988. The story was the first detailed discussion in the press of
Clifford’s multiple roles at First American. The WFs profile of Altman
appeared on October 8, 1984.

The remark that Abedi “wanted to be bigger than the bank” appeared
in a September 4, 1991, report on BCCI by the Task Force on Terrorism
and Unconventional Warfare of the House Republican Research Commit-

Notes oft Sources

466 )

tee, entitled “BCCI — An Introduction.” BCCI’s relationship with Abu
Nidal was first reported by London’s Sunday Times in July 1991; the
information here is mainly from Seale.

Roosevelt’s meeting with Abdel-Aziz is described in Lacey’s Kingdom .
Other valuable sources on Saudi Arabia and U.S.-Saudi relations include
The House of Sand by Holden and Johns and The American House of
Sand by Emerson — a major source on Saudi Arabia’s lobbyists.

Khashoggi’s courtship of Nixon is described in Sampson’s Arms Bazaar
and Boulton. Boulton is the source for the rumors that Nixon used cam¬
paign money from Khashoggi and that Khashoggi financed a record of
Nixon’s speeches. Nixon’s use of Khashoggi as a go-between emerged in a
1976 investigation by the Church Committee. The failure of Nixon ad¬
ministration officials to turn in gifts from foreign officials was disclosed by
Maxine Cheshire of the WP in a series of stories in 1974.

Pharaon’s investments in Bank of the Commonwealth and Main Bank
were discussed in detail in L.G.’s August 1979 article for Institutional
Investor; he interviewed several sources at that time, including Pharaon’s
U.S. representative, Frank Van Court. Information also came from Crowe
and Levins. The Hunts’ silver scheme is the subject of Fay’s book.

Carter’s 1983 speech was in Atlanta in May at a U.S.-Saudi conference;
the source is Emerson. Yassin’s role in collecting FGB stock for Prince
Nawaf was reported in the WP, February 11, 1978, citing Fed documents.
Carter’s op-ed piece on Rushdie appeared in the NYT, March 5,1989. The
information on Dutton comes mainly from Emerson, based on various
documents Emerson obtained.

Lance recalled his meeting with Zayed in his October 23, 1991, testi¬
mony to the Kerry Committee and in an interview with the authors. The
UAE official who discussed Zayed’s intentions for First American is As-
lam, the former financial adviser to the sheikh; he made these remarks in
written statements obtained by P.T.

The statement by Clifford about the creation of Israel is from the March
1991 issue of M, Inc.; he also discusses this in his memoirs. Clifford
described his role as an envoy for Carter in September 1988 trial testi¬
mony in the suit against First American by former shareholders.

Symington’s Church Committee vote is described in Levins. Informa¬
tion on DiBona, Lesher, and Battle comes mainly from Emerson. Informa¬
tion on Gray’s lobbying activities comes mainly from Trento and Emerson.

The information on Avenel is based on real estate records, press reports,
and interviews with investigators and real estate experts. Dan Moldea, a
writer in Washington, D.C., provided valuable information on the Avenel
project and the FBI investigation. Natelli’s pardon file was obtained from
the Justice Department through a Freedom of Information Act request.

Confidential sources with access to First American records provided the

Notes on Sources

( 4^7

information on loans to Gray and other First American directors. Deaver
and Novak commented on their real estate loans from First American in
interviews with P.T. Gary Hart’s loans from First American were reported
in the press at the time. A former BCCI official described Abedi’s trip to
Washington to meet with Hart. Newsweek quoted the Hart campaign aide
on August 26, 1991. Hart was interviewed by P.T.

The Libyan donation to Jesse Jackson was reported in Newsweek ,
February 13, 1984. The Arab League donation was mentioned in the WP,
January 31, 1984. The Yamani dinner was described in the WP on Octo¬
ber 22, 1979.

Dutton’s op-ed piece appeared in the LAI] June 17, 1988. Clifford’s
praise of Jackson was quoted in Neivsweek on April 11, 1988. Jackson’s
remark about Clifford is quoted in Colton. (She was Jackson’s press
secretary during the campaign.) Lance told the authors in an interview
how he introduced Jackson to Abedi. Nazir Chinoy testified to the Kerry
Committee on March 13,1992, about BCCI’s payment of travel expenses
for Jackson.

6: Covert Operations

Kermit Roosevelt’s letter to Northrop was obtained by the Church Com¬
mittee. The letter is quoted in Holden.

Adham talked about his background in a December 20, 1979, deposi¬
tion in Fulaij etal. v. Middendorf et al. (a lawsuit stemming from the First
American takeover battle) and during the April 23, 1981, hearing at the
Fed. Other sources on Adham include Holden, Lacey, Halliday, Crowe,
and Blandford. His role as an intermediary between Sadat and Kissinger is
mentioned in Anderson, Holden, and Kissinger. Adham confirms through
his lawyer his role as a liaison with foreign intelligence agencies but denies
being trained by the CIA.

The Saudi attitude toward foreign banks was explained to P.T. in inter¬
views with Saudi officials conducted in that country in the early 1980s.
Adham’s account of how he met Abedi is contained in the December 1979
deposition cited above.

The Camp David negotiations are discussed in detail in Carter’s Blood
of Abraham. Adham’s role and subsequent dismissal are discussed in
Holden, which also notes that Adham remained an influential figure.

Adham’s role in Saudi intelligence and his ties with the CIA are men¬
tioned in several places, notably Holden. Khalil’s attorney, James Linn,
confirmed in an interview that his client held a senior position in the Saudi
government, related to communications and intelligence. Investigators for
the Kerry Committee learned that Khalil was a frequent visitor to the CIA

Notes on Sources

468 )

station in Saudi Arabia as recently as 1991. Through his lawyer, Khalil
denies working for the CIA but declines to say if he worked with the CIA.

Nicholas Deak’s services for the CIA were reported by Tad Szulc in a
story for Inquiry ; November 21, 1977. Information on Castle Bank, Mer¬
cantile, and Nugan Hand comes mainly from Kwitny and Lernoux. The
Middendorf-Casey discussions were reported in Jack Anderson’s column
in the WP, July 30, 1984.

Prince Mahmood Reza Pahlavi was identified as a BCCI shareholder in
the Vaez Report. The assistance Helms received from Clifford, Williams,
and Symington is discussed in Thomas. Information on Helms’s consult¬
ing business and his ties to Irvani and Carlson comes from documents
released by the Kerry Committee. When the committee sought informa¬
tion from Carlson in 1992, he invoked his constitutional right against
self-incrimination. Carlson declined to be interviewed by the authors.

Information on Gray’s intelligence links is from Trento. Harr’s career at
the NSC is mentioned in Prados. Issan Kabbani is identified as a business
associate of Close’s in the Internatio?ial Herald Tribune , December 10,
1981 (from the NYT News Service). Bilgrami mentioned Kabbani in his
July 30, 1992, Kerry Committee testimony. The information on Mazrui,
Yassin, and Shaheen is from the Kerry Report.

Bush’s tenure as CIA director is discussed in detail in “Company Man,”
by Scott Armstrong and Jeff Nason, in the November/December 1991
issue of Mother Jones. Rogers’s ties to the shah are discussed jn Crowe.

A former BCCI official is the main source for Abedi’s assistance to Zia.
The Afghan operation is in McCoy and Woodward as well as articles by
Steve Coll of the WP. A July 19, 1992, story by Coll includes the $2 billion
estimate; a September i, 1991, story mentions Prince Turki’s role.

BCCI’s involvement in the Afghan operation was described by former
officials of the bank. The sources for information on war materiel and
pack animals include internal BCCI documents. Abedi’s meetings in
Washington with Casey were reported on NBC-TV’s Sunday Today pro¬
gram on February 23, 1992. In interviews with the authors, a former BCCI
official provided information on the content of their discussions as well as
other details on the Abedi-Casey relationship. Kerry’s staff members and
the Kerry Report are the sources for the footnote on the CIA’s denials.

The CIA has acknowledged publicly that it maintained accounts at
BCCI for routine banking business. Altman said in October 24, 1991,
testimony to the Kerry Committee that the CIA maintained accounts at
First American.

The role of Khashoggi and Ghorbanifar in Iran-contra is discussed in
Persico, the Tower Commission Report , and other sources. The incident in
which Khashoggi told his colleagues about potential profits is based on
June 8, 1987, testimony to the congressional Iran-Contra Committee by
Emmanuel Floor, a former aide to Khashoggi. BCCI’s Chinoy described

Notes on Sources ( 469

the bank’s role in Iran-contra in March 13, 1992, testimony to the Kerry
Committee. Further details are contained in the Kerry Report .

Durrani discussed his use of BCCI in interviews with P.T. The Gokals’
status as BCCI’s biggest borrowers is confirmed in the Vaez Report and in
audit reports by PW, issued in 1989, 1990, and 1991. The authors ob¬
tained internal BCCI documents and other company papers that pertain to
the business of Banerjee and others. Yacoub Wadawalla’s remark ap¬
peared in New York Magazine on December 16, 1991.

Iraq’s $13 million debt is mentioned in an auditor’s review of BCCI’s
foreign loans obtained by the Kerry Committee. The most important
single source of information for the BNL affair is the House Banking
Committee, which has released or quoted many relevant documents.
Other sources include the Kerry Report , Timmerman, FT articles by Alan
Friedman, and stories in the WSJ as well as the Italian and Swiss press.

Gonzalez criticized Scowcroft and Eagleburger during a May 21, 1992,
hearing of the House Banking Committee. The role of Pakistani officials in
the U.S. opening to China is described in Kissinger’s memoirs. First City’s
lending to the Gokals was disclosed in legal documents in Switzerland. A
source close to Abboud said that the banker discussed buying some of
BCCI’s offices. Abboud himself denies this, though he admits he planned
to buy BAII’s New York office.

Gonzalez’s inquiry into the BNL affair turned up information on Stoga’s
trip to Iraq and Kissinger’s consulting relationship with BNL. Kissinger’s
office provided the information on the resignation from the advisory
board and the June 1991 speech.

Pakistan’s efforts to obtain nuclear technology have been widely re¬
ported. The legal troubles of Inam ul-Haq and Arshad Pervez were re¬
ported in the U.S. and Canadian press. Time's interview with General Zia
was published on March 30, 1987.

Aitken’s ties to the Saudi royal family and the investment by Prince
Mohammed were reported in the Independent on February 25, 1990.

The main sources for the section on TCI and Capcom include company
documents and interviews with former BCCI officials and several investi¬
gators. An extensive WSJ article by Johnnie Roberts, on January 27,1992,
provided valuable background information on TCI. Investigators’ notes
and summaries as well as documents relating to TCI and its executives
were also critical. Public TCI accounts and filings provided useful infor¬
mation. Articles by Christopher Byron of New York Magazine were help¬
ful, particularly those on August 19, 1991, and August 10, 1992.

The Kerry Committee devoted part of its July 30,1992, BCCI hearing to
Capcom. During the hearing, it released hundreds of pages of documents,
including the committee’s correspondence with Carlson, Fox, Magness,
Romrell, and TCI; some of Romrell’s correspondence with Akbar, Khalil,
Adham, and others; Peat Marwick’s 1989 report for Britain’s Securities

Notes on Sources

470 )

and Investments Board with supporting documentation and exhibits; the
Chicago Mercantile Exchange’s 1989 report on Capcom Futures; memos
to and from Romrell; portions of Romrell’s personal notebooks; Capcom
shareholder lists; Capital Fund documents; and Fox correspondence.

In reply to questions related to Capcom, Adham’s Washington lawyer
merely stated that the Saudi “invested in Capcom and [that] accounts were
maintained there for his children, not for himself.”

Khalil’s lawyer, James Linn, responded to the authors’ questions about
Khalil’s role in the BCCI affair by saying that the Saudi maintains he is
innocent of wrongdoing. In late October 1992, Linn gave the authors an
undated, four-and-a-half-page statement from Khalil, which was trans¬
lated into English from Arabic. In the statement, Khalil says he worked in
various positions in the Saudi government, that he became an employee of
Adham’s in 1962, and that he met Abedi through Adham. He says he
asked BCCI to close his accounts and sell all his BCCI stock in the
mid-1980s, after he learned that the bank had incurred large losses.
Because the bank failed to carry out these instructions, Khalil says, he
suffered “serious financial losses.” He says that when he learned of prob¬
lems at Capcom, he sold his stock in that company — at “a considerable
financial loss” — to Akbar. The statement does not address in any detail
the allegations that have been made against Khalil by prosecutors and
bank regulators.

Robert Gray’s relationships with the CIA and CNN are discussed at
length in Trento. A former senior BCCI official told the authors about
Turner’s trip to China. Bailey’s remarks were broadcast on the NBC
Nightly News on February 21, 1992. North made the quoted remarks on
July 10, 1987.

7: The Dirty Money Machine

Abedi’s remarks about BCCI’s serving a purpose appeared in an interview
with Institutional Investor in January 1983. The comment on “purity and
chastity” appeared in Euromoney in July 1978. Rahman’s remark about
the “moral balance sheet” is from an interview with RT.

The account of BCCI’s ties to Ershad is based on a November 2, 1991,
article in the LAT and an interview by RT. with Mike Hershman of the
Fairfax Group of Falls Church, Virginia, which was retained by the Bang¬
ladesh government. Information on Kroll’s investigation of Saddam Hus¬
sein’s hidden wealth comes from press reports and interviews by RT. with
Kroll’s investigators.

BCCI’s role in handling dirty money in Pakistan has been described by
former bank officials and government investigators. McCoy is an excellent

Notes on Sources

( 47i

source on the Golden Crescent drug trade. Valuable information was also
provided by Lawrence Lifschultz. The 1988 State Department estimates
are from that year’s edition of the International Narcotics Control Strate¬
gy Report. McCoy is the source of the $8 billion-$io billion figure; he said
these were conservative estimates by economists. Fazle Haq’s “blue mur¬
der” remark appeared in the NYTMagazine, January 15, 1989.

BCCI’s ties to Nawaz Sharif were reported in the WSJ, October 23,
1991. The former associate cited in the article was Salmaan Taseer, who
worked with Sharif in Dubai and is now a political opponent. The prime
minister’s praise of Fazle Flaq was reported by Agence France Presse on
October 3, 1991.

Nigeria’s population was generally thought to be more than 100 mil¬
lion. In early 1992, the results of a new census were reported, and it put
the total at 88.5 million. The quote on the evils of bribery appeared in
Sandbrook. Tam David-West’s $1 billion estimate appeared in Time, Sep¬
tember 8, 1985.

A list of the shareholders of BCCI’s Nigerian bank was provided to L.G.
in March 1989 by Clement R. Gagne III, a Washington lawyer who
represented BCCI. The relationship between Dasuki and Babangida was
described in interviews with Nigerian sources. A major source on Dasuki’s
background was an article in the August 26, 1988, issue of Africa Con¬
fidential, a London-based newsletter. The problems faced by foreign banks
in Nigeria were described to L.G. by several American and European
bankers in interviews conducted in 1989. BCCI’s foreign exchange fraud
was reported in the FT, September 16, 1991. Former BCCI officials de¬
scribed to the authors how employees made money on the side.

Attock’s cozy ties with the Nigerians were described by a former Attock
employee. Additional information was provided by a former BCCI official
familiar with the company. Early reports of Nigeria’s barter deal appeared
in MEED in May 1986 and Platt's Oilgram on June 16, 1986. BCCI’s
lawyer Gagne declined to provide any information. The terms were even¬
tually published in the FT, November 26, 1991.

Blum’s conversation with the Nigerian diplomat is from an interview
with Blum and his August 1, 1991, testimony to the Kerry Committee.

The authors have a copy of the Suriname loan agreement. Goedschalk’s
remarks about the deal appeared in the LAT, March 1, 1992. BCCI’s role
as a depository for various governments and government agencies is
documented in bank records obtained by the authors. The Jordanian army
deposits were reported in the WSJ, July 28, 1991.

The evidence of bribes to central bankers has been obtained by investi¬
gators for Robert Morgenthau. In a July 29, 1991, press conference, he
alleged that Peruvian central bankers were bribed. One year later, allega¬
tions of bribes to several other central bankers were made in a Morgen-

Notes on Sources

47 2 )

thau press conference and a New York State indictment of Abedi and
other defendants. Sakhia recounted his experience in Seoul in his October
22, 1991, Kerry Committee testimony.

A former BCCI official told the authors about the half-billion-dollar
deposit from a member of the al-Ibrahim family. The Price Waterhouse
audits of 1989 and 1990 showed Ibrahim borrowings of close to $100
million. An investigation arising from a Los Angeles court case subse¬
quently disclosed that the Ibrahims’ deposits at BCCI of more than $100
million substantially exceeded their borrowings from the bank.

The information on formal charges that BCCI violated exchange con¬
trols comes mainly from a March 10, 1989, memo to L.G. from BCCI’s
lawyer Gagne. The Colombian charges were reported in El Tiempo, a
Colombian newspaper, on May 25, 1989. The Brazilian charges appeared
in Jornal do Brasil, June 8, 1989. Hershman of the Fairfax Group de¬
scribed his Indian investigation in a 1992 interview with P.T.

Several former BCCI officials described in confidential interviews how
they were pressured to bring in deposits. Chinoy made his remark about
the law in an interview with Ira Silverman, a producer for NBC News.
(The interview, which was not broadcast, was conducted on March 13,
1992, the day Chinoy appeared before the Kerry Committee.)

Wallace Kemper’s activities and his relationship with BCCI were de¬
scribed by a law enforcement source in Britain, who also provided docu¬
mentation, including copies of correspondence between Kemper and vic¬
tims. The description of his brochures appeared in the Sunday Times of
London, September 27, 1987.

The account of Morris Miller’s career is based on the indictment as well
as interviews with a law enforcement source and some of the would-be
borrowers. L.G. also attended part of the trial. Information on the pro¬
prietors of the phony Montserrat bank comes from law enforcement
sources, a bank regulator, and victims.

Information on First American Currency and its relationship with BCCI
comes from press reports, BCCI records, and an interview by L.G. with
Jim Harbin, a U.S. postal inspector who worked on the case.

The estimate of penny-stock losses is contained in a report by the North
American Securities Administrators Association (NASAA), released in
September 1989. Details of the Quinn case and Quinn’s use of BCCI come
from various press reports, the NASAA report, and interviews with inves¬
tigators, including Laurent Kasper-Ansermet, the Swiss magistrate.

Valuable information on First Commerce Securities was given to L.G.
by a former employee, who also provided various documents. Other
interviewees included Jan Koers, the prosecutor, and Jan van Apeldoorn,
the bankruptcy trustee. Diane Francis wrote about First Commerce and
other boiler rooms in The Contrepreneurs . Nazerali declined to respond
to questions from the authors.

Notes on Sources

( 473

Bilbeisi’s business activities have created a lengthy trail of paper. Some
of the most important sources were court papers related to litigation
against Bilbeisi by the Lloyd’s of London syndicate. The lead plaintiff was
a Lloyd’s underwriter named Nicholas Collwyn Sturge, and the suit was
filed on January 18, 1988, in the U.S. District Court for the Southern
District of Florida. On December 28, 1990, the syndicate filed a civil
RICO suit against Bilbeisi and other defendants. Other sources included
Bilbeisi’s deposition in a 1983 civil suit, Interastra v. Teledyne, filed in the
Western District of Michigan. RT. obtained a copy of an extensive report
on Bilbeisi compiled by BCCI’s Florida law firm, Holland & Knight,
which sets out much of Bilbeisi’s alleged wrongdoing while blaming
BCCI’s Miami office for running a rogue operation beyond the control of
the bank’s head office. On August 11, 1991, the Neiv York Daily News
broke the news of Bilbeisi’s plans to go into business with alleged mob¬
sters. Other sources included FBI documents, letters from Dougherty to
Dexter Lehtinen (the former acting U.S. attorney in Miami), and photo¬
copies of the porter’s log at the Sanctuary.

8 : False Profits

Rahman’s interviews with the Serious Fraud Office in London in 1991 and
his August 1, 1991, testimony before the Kerry Committee were import¬
ant in understanding BCCI’s financial condition. Several other former
BCCI officers, including one who was part of Naqvi’s special duties team,
were also helpful. Throughout this chapter, two reports prepared by PW
were invaluable: its June 22, 1991, report on BCCI for the Bank of
England and its report on ICIC of June 17, 1991. The Vaez Report
contains critical information about BCCI’s early years. Earlier Price
Waterhouse reports and correspondence, much of which was released by
the Kerry Committee, also provided useful background. Other important
information came from P.T.’s interviews with Masihur Rahman and sev¬
eral other BCCI officials.

A former official of the Gulf Group explained some of its structure and
its relationship with BCCI. Former BCCI and Bank of America officials
also provided information about BCCI’s tangled finances. A lawyer for the
Gokals denies they were involved in wrongdoing.

Sakhia’s remarks were made in testimony to the Kerry Committee on
October 22, 1991. Abedi’s remarks were made in his March 8, 1978,
deposition in Financial General Bankshares, bic., v. Lance et ai Inter¬
views with past and present U.S. government investigators provided useful
guidance for the analysis of BCCI’s true financial condition.

The authors obtained several BCCI shareholder lists, some from its
internal records, one from its 1983 offering of floating-rate notes, others

Notes on Sources

474 )

from various published sources. Court documents were the principal
source for Zayed’s dispute with Darwaish and Aslam. Information also
came from one of the lawyers involved.

Congressional sources and government investigators were particularly
important sources on Capcom. Gil Miller’s remarks were made in an
interview 7 with P.T. in the summer of 1991. P.T. obtained a copy of a report
on Capcom prepared by accountants from Peat Marwick McLintock; it
was submitted in 1989 to Britain’s Securities and Investments Board. The
destruction of a large number of Capcom records was reported by the
London Independent on August 18, 1991.

9: El Dorado

Kalish described his dealings with Noriega in January 28, 1988, testimony
before the Permanent Subcommittee on Investigations of the Senate Com¬
mittee on Governmental Affairs. His partner, Ritch, appeared before the
Kerry Committee on February 8, 1988. Other useful sources were the
biographies of Noriega by Dinges and Kempe.

BCCI’s anomalous performance in Hong Kong was described in Euro¬
money in October 1986. The same magazine discussed its performance in
the UAE in May of that year. Khun Sa’s use of BCCI was reported in the
FT, August 3, 1991, which credited Reuters.

Fafowora’s ties with BCCI were mentioned to L.G. by a law enforce¬
ment source. Details are contained in court records, including a pleading
called Government's Response to Victor O. Adenijis Petition for an Ancil¬
lary Hearing in US. v. Steve Fafowora et al. y which was filed on July 14,
1988. Attached as an exhibit are the Articles of Association of Afro
Caribbean Connections Limited.

Bilgrami discussed his background and his activities in Latin America in
July 30, 1992, testimony to the Kerry Committee. Other former BCCI
officials, including Alberto Calvo, have discussed the Latin American
expansion in interviews with the authors.

A source involved in trying to broker the Peruvian jet deal discussed the
transaction in interviews P.T. conducted in 1991. Members of the Peruv¬
ian congress, U.S. investigators, and lawyers for some of the participants
also discussed the transaction.

Pharaon’s activities in South America were described by former associ¬
ates and in Garcia Lupo’s book. It was in a 1990 interview with P.T. that
Pharaon blamed an employee for the mistake on his application for Argen¬
tine citizenship. The Yoma case was widely reported in the press.

Sakhia’s remark on drug money was made in an October 7, 1991,
interview with Kerry’s staff. The use of BCCI by Rodriguez Gacha was
described in the WP, August 19, 1991. Aziz Rehman recounted hisexperi-

Notes on Sources ( 475

ences at BCCI to Jack Blum in a deposition on October 24, 1988. The
IRS’s lack of follow-up was described in the Schumer Report .

The footnote on the Shahid Riky case is based on a copy of the indict¬
ment, a story in the Chicago Tribune (September 5, 1986), and an inter¬
view with a law enforcement source involved in the case.

Anibal Zapata’s use of BCCI was reported in the London Observer on
February 12, 1989. The Iranian heroin trafficker was discussed in the
Schumer Report as well as in an AP report on August 16, 1991. The
Federal Reserve’s 1987 criminal referral was mentioned in the House
Banking Chronology and has also been mentioned in congressional testi¬
mony by Fed officials.

Patrick Anthony Good’s use of BCCI was described to L.G. in 1989 by
a Canadian law enforcement officer. Additional details come from a court
document (an “information to obtain a search warrant”), Equity — The
Business of Vancouver, September 1989, and the Vancouver Sun, August
26 and September 30, 1992.

Amjad Awan discussed his background and his dealings with Noriega in
his September 30,1988, deposition to the Kerry Committee, in his Decem¬
ber 1991 testimony in U.S. v. Noriega et al., and his July 30, 1992,
testimony to the Kerry Committee. Some of the information on Noriega’s
financial dealings is based on BCCI records. Kempe is the source for CIA
deposits through dummy companies. A former BCCI official who worked
closely with Awan told L.G. about “sackfuls of money” and the rumored
advice from the CIA.

The allegation that Noriega received $10 million in bribes was made by
Assistant U.S. Attorney Myles Malman before Noriega’s trial began in
September 1991. The sources for Awan’s relations with Rodriguez and
Pretelt include Awan’s September 30, 1988, deposition to the Kerry Com¬
mittee and a September 24, 1988, memo to file by Jack Blum.

The backgrounds of Kalish and Ritch were described in their Senate
testimony (cited above), in various press reports (notably St. Petersburg
Times, February 22, 1988), and in Dinges and Kempe.

Awan discussed the loans he received from Noriega in his December
1991 testimony at the Noriega trial. Details of Awan’s real estate invest¬
ments emerged during bond hearings in late 1988, after his arrest in U.S. v.
Awan et al. His practice of transferring money through First American is
documented by a large number of BCCI records.

10: Trouble in Tampa

Several of the people mentioned in this chapter spoke on the record to the
authors, as noted above. Many others spoke on a not-for-attribution basis,

Notes on Sources

47^ )

including current and former BCCI employees, Justice Department of¬
ficials, sources at Customs, and defense lawyers.

Court records, of course, were extremely useful. Among the more im¬
portant were the October 1988 indictment, the superseding indictment
issued six months later, transcripts of bond hearings held in late 1988, and
the Burris Affidavit. The authors also obtained transcripts of several of
Mazur’s conversations with Awan, Akbar, and other targets.

Several people involved in Operation C-Chase testified to the Kerry
Committee in late 1991, including Robert W. Genzman, Greg Kehoe, and
Mark Jackowski of the U.S. Attorney’s Office in Tampa and Robert Mazur
and William von Raab of Customs (although both had left Customs by
that time). Jack Blum testified on August 1,1991, about his experiences.

The statement about “deposit marketing” is from the notes of a BCCI
marketing meeting held in New York on September 30, 1988. The role of
Rackley in advising Abedi’s doctors was reported by Douglas Frantz of the
LAT on June 19, 1992; Frantz wrote a book on BCCI with James Ring
Adams which contains a great deal of information on C-Chase.

Information on the clash between the Naqvi and Iqbal factions and the
power struggle after Abedi’s illness comes mainly from a background
interview with a highly placed BCCI official. The Forbes report on the
Lance rumor appeared on June 13, 1988; the Times of London column on
August 25, 1988.

Reagan’s call for a “national crusade” was quoted in Newsweek on
February 9, 1987. Von Raab’s assistance to the DEA after the Camarena
abduction is described in Shannon.

Mazur explained the origin of the C-Chase name in his November 21,

1991, Kerry Committee testimony. Awan’s boast about $10 million is
mentioned in the October 1988 indictment. The amount of money chan¬
neled through First American is based on figures in the Burris Affidavit.

Awan’s trip to Washington with Noriega was described in Awan’s Sep¬
tember 30, 1988, deposition to the Kerry Committee and his July 30,

1992, testimony to the same committee. The visits to Casey and North are
mentioned in Dinges.

Awan’s status as an unindicted co-conspirator in the Noriega case was
revealed by Jackowski at a bond hearing on November 28, 1988. The
conversation with Naqvi and Noriega’s decision to transfer the money
were described in Awan’s testimony at the Noriega trial. The $23 million
transfer is mentioned in the federal indictment of Naqvi and others an¬
nounced in November 1991.

Blum described his background and his investigation in interviews with
the authors and in his Kerry Committee testimony. The quote mentioning
Hannah Arendt and others is from a profile of Blum in the WP, August 13,
1991. PW’s allegation that Akbar was bribed is from a report for the Bank
of England in 1991; it was reported in the WSJ on July 17, 1991.

Notes on Sources ( 477

The Alcaino anecdote is from a detailed article on C-Chase by Mike
Weiss in the San Francisco Examiner on July 22, 1990.

Altman testified to the Kerry Committee on October 24, 1991, about
his handling of Blum’s investigation. Blum’s statements about the conduct
of Clifford and Altman are from interviews with Blum. His remarks about
the destruction of records are from his Kerry Committee testimony. Addi¬
tional information about the movement or destruction of records comes
from the October 1988 indictment, Mazur’s Kerry Committee testimony,
and Sakhia’s November 22, 1991, testimony to the same committee.
Kerry’s recollection of his meeting with Clifford appeared in the NYT, July
29, 1991; he provided other details in an interview with L.G.

Awan mentioned his plan in a taped conversation with Mazur and in his
testimony at the Noriega trial. The Iacocca remark is from a transcript of
the conversation.

Mazur talked about his desire to continue the investigation in his testi¬
mony to the Kerry Committee. Additional information on this point is
contained in the Schumer Report , which also mentions Mazur’s hope to
meet Naqvi. The quote on BCCI’s “moral dimension” is from the Novem¬
ber 1988 issue of BCC International.

11: Containment

The authors reported on most of the events dealt with in this chapter and
interviewed several of the principals, including, as noted above, BCCI
officials, Justice Department officials, and defense lawyers.

Cook’s remark about the volume of documents is from a 1989 interview
with L.G. The FT headline appeared on October 12, Le Monde' s the
following day. Von Raab made his prediction in an October 1988 inter¬
view with L.G.

Information on trips to London by Clifford and Altman comes from
invoices sent to BCCI by their law firm on December 13,1988, and August
14, 1989. Their role in recruiting, paying, and overseeing the work of the
criminal defense lawyers is undisputed.

Correa da Costa’s role at Kissinger Associates is documented by records
obtained by the Kerry Committee. The information on Stoga’s dealings
with Helmy is based on copies of the correspondence cited in the book.
Information on William D. Rogers is from the Kerry Report and from
copies of correspondence obtained by the authors.

Hill and Knowlton disclosed its fee when it registered with the Justice
Department as a “foreign agent.” Gray’s extensive ties to Edwin Wilson
are discussed in Maas and Trento.

Mankiewicz’s remarks were reported in a story by Paul Starobin in the
National Journal, July 9, 1991. The authors have copies of the Hill and

Notes on Sources

478 )

Knowlton documents mentioned in the chapter. One copy of the “plan of
action” was forwarded to BCCFs Sakhia in New York by Donald C.
Deaton, the managing director of Hill and Knowlton in New York. The
remarks attributed to a Hill and Knowlton official are based on con¬
fidential interviews conducted by L.G. in early 1989.

Barcella’s March 26, 1990, interview was with L.G. When asked to
explain the apparent contradiction, Barcella said that BCCI improved its
standards after the 1988 indictment. However, L.G.’s notes of the March
1990 interview indicate clearly that Barcella was referring to BCCFs
conduct before the indictment. The account of Tariq Ali’s experiences with
BCCI is based on interviews with Ali and on British press reports. Blum
described his trip to Pakistan in a June 1989 interview with L.G.

Jackowski’s remarks were made at bond hearings on October 11 and
13, 1988.

Blum described the Customs investigation of the leak of the Noriega
documents in interviews with L.G. The account of his meetings with
informants in Florida is based on interviews with Blum, his August 1,
1991, testimony to the Kerry Committee, and Jackowski’s November 21,
1991, testimony to the same committee.

The account of what the U.S. Attorney’s office did to investigate the
allegations regarding First American is based in part on “BCCI Activities”
and interviews with federal prosecutors.

The information on the legal fees paid by BCCI is from the Kerry
Report. Altman’s discussions of the case with BCCI’s board are mentioned
in minutes of board meetings held on August 18 and November 27, 1989,
by directors of BCCI Holdings (Luxembourg) S.A. Blum described his
discussions with Barcella in an interview with L.G. in November 1989.
Barcella confirms that he met with Blum but cannot recall talking about
BCCI’s attempts to get a plea bargain. He said plea negotiations did not
begin until December. The prosecutors, however, say that BCCI’s lawyers
had been trying to make a deal for months, although they add that serious
negotiations did not begin until about December. L.G. was in the audience
when Thornburgh spoke at the money-laundering conference in Miami.

Kerry’s and Tischler’s remarks about the plea bargain were reported by
the NBC Nightly News on January 16, 1992. The January 19,1990, letter
to Thornburgh was signed by Senators Kerry, Howard Metzenbaum of
Ohio, Howell Heflin of Alabama, and Dennis DeConcini of Arizona. The
February 1, 1990, letter to Judge Hodges was signed by Kerry, Met¬
zenbaum, and Congressmen William Hughes of New Jersey, Mel Levine of
California, Edward Feighan of Ohio, and Charles Rangel of New York.
Von Raab’s remarks about influence peddlers were made at an August 1,
1991, hearing of the Kerry Committee.

Clifford’s statements about his contributions to Kerry appeared in the

Notes on Sources

( 479

WP on March 31,1991. Mankiewicz was quoted in the National Journal,
September 7, 1991; this story was also the source for the campaign
contribution by Parvez. Kerry’s remarks about the difficulty of lining up
support for hearings come from “The Bank of Crooks and Criminals,” a
Frontline documentary on PBS-TV on April 21, 1992. The visit by Culver
and Banoun to Kerry is mentioned in a letter from Kerry to the two
lawyers dated July 18,1989. Blum described his experience with Culver in
an interview with L.G. All of Hatch’s comments about his speech are from
an interview with L.G. on February 27, 1990, with the exception of his
remark about Wechsler and Barcella, which appeared in Newsweek, Au¬
gust 26, 1991.

Carter’s 1988 remarks about Global 2000 were reported by UPI on
October 13, 1988. His trip to Nigeria was reported by the NBC Nightly
News on January 16, 1990. His Atlanta Constitution interview appeared
on February 3, 1990.

Roma Theus’s September 24, 1990, memo was released by the Kerry
Committee at its October 24,1991, hearing on BCCI. The information on
campaign contributions is from various press reports and Federal Election
Commission records.

Jackowski’s comments about Blum’s informants and related matters
were made in his November 21, 1991, Kerry Committee testimony.

Naqvi’s remark about his “clean conscience” appeared in Newsweek,
August 12,1991. His celebratory message to Clifford was in the form of a
fax dated January 17, 1990. The Acoca-Shafi letter was provided to L.G.
in 1990 by a BCCI employee; identically worded letters were sent to BCCI
offices in several parts of the world.

Blum’s reaction to the plea bargain is from a January 17, 1990, inter¬
view with L.G.

1 2: The Enforcers

The Harry F. Bauer citation was issued by Navy Secretary John Sullivan
on behalf of President Roosevelt. Much of the information on Mor-
genthau’s background is from the family history by his brother, Henry
Morgenthau III. The comments on Henry Morgenthau, Jr., by Clifford are
from his memoirs.

The account of Blum’s job application and his meeting with Morgen¬
thau is based on interviews with Blum conducted by P.T. and L.G. Brian
Rosner described Moscow in a 1990 interview with L.G.

Von Raab described his conversation with Gates and the CIA report he
received from him in a 1991 interview with L.G. and in his August 1,
1991, Kerry Committee testimony.

Notes on Sources

480 )

Burris’s experiences with the Fed were described in the House Banking
Chronology, various press reports, and in the Schumer Report.

Morgenthau described his problems with the Justice Department in his
May 23, 1991, testimony to the Senate Banking Committee. Federal
prosecutors responded to the criticism in interviews with the authors. P.T.
obtained a copy of the internal Fed memo that mentioned Morgenthau’s
August 1989 tip to the Fed.

Most of the information about PW’s audits is based on copies of the
audit reports, supplemented by interviews with bank regulators. The fact
that the Bank of England informed the Fed about loans from BCCI to First
American’s shareholders was revealed by E. Gerald Corrigan, president of
the New York Fed, in his September 13, 1991, testimony to the House
Banking Committee. He said the information came from the chairman of
the College of Supervisors; at that time, the panel was chaired by a Bank of
England official. Separately, a Fed official confirmed to P.T. that Corrigan
was referring to a Bank of England official.

The main source for Abedi’s trip to Abu Dhabi in early 1990 is a former
BCCI official. The information about the sale of Bin Mahfouz’s stock was
provided by A. Hafeez, a BCCI official, in a May 1,1990, letter to William
Rutledge, a vice president of the New York Fed. PW’s explanation of its
handling of BCCI’s 1989 accounts appeared in the WSJ , June 24, 1991.
Details of the layoffs and branch closures come from various press reports
in the spring of 1990, including WSJ stories by P.T.

Altman’s remarks are from two interviews with L.G., one in July 1989,
the other in March 1990. The WSJ's “rogue bank” story, co-authored by
P.T., appeared on May 3, 1990. Altman described his May 8, 1990,
meeting at the Fed in a memo. The authors have the minutes of First
American’s May 24, 1990, board meeting.

The account of Clifford’s efforts to sell First American is based mainly
on the correspondence cited in the chapter, which was released at the
Kerry Committee’s October 24, 1991, hearing. Clifford’s statement to the
board about the need for a bridge loan is mentioned in the House Banking
Chronology.

Altman’s September 27, 1990, letter to the WP was quoted in the
newspaper on March 31, 1991. The Rahman quote is from his August 8,
1991, testimony to the Kerry Committee. Moscow’s account of his con¬
versation with Fiske and Cherkasky’s remarks about FTIdie George were
reported in Vanity Fair ; April 1992.

The authors have a copy of the McQueeney memo; they learned of the
Manhattan D.A.’s provision of information to the Fed from interviews
with government investigators and the Fed.

The WP 's story on the investments by Clifford and Altman in First
American’s stock appeared on May 5, 1991. According to a statement
issued by Hill and Knowlton in May 1991, Clifford’s pretax profit was

Notes on Sources ( 481

$6,557,31:9; Altman’s was $3,271,109. Rahman described Hammoud as
a flexible front man in testimony and in an interview with RT.

The PW probe and the clash with the regulators are set out in docu¬
ments and audits released by the Kerry Committee and in other BCCI
documents obtained by the authors. The information on the abortive
restructuring is based mostly on P.T.’s interviews with regulators and
BCCI officials. The decision to close the bank was described in detail by
Jaans and by two other participants in interviews with P.T.

13: The Shutdown

The account of the July 5, 1991, seizure of BCCI and the aftermath
was covered by P.T. for the WSJ; he interviewed many of the principals.
Useful information also came from press reports, notably stories by
other WSJ reporters as well as FT and NYT writers. The estimate of
more than $9 billion in losses is from the liquidator’s report of Decem¬
ber 1991. Choudary’s remarks appeared in the NYT, August 29,1991.
The BCCI employee who said he was “buried” was interviewed by P.T.

Most of the information on deposits by British local authorities is from
a report entitled Banking Supervision and BCCI: The Role of Local
Authorities , issued on December 16, 1991, by the Treasury and Civil
Service Committee of the House of Commons.

The effects of the BCCI closure on customers in Cameroon were de¬
scribed in the WSJ, August 6, 1991. Mohiuddin’s remarks were quoted in
the WSJ , July 26,1991.

The account of Morgenthau’s July 29, 1991, press conference is based
on notes by P.T., who wrote about it for the WSJ. The Fed order issued that
day is the main source for the allegations against Adham. The Fed order is
also the source for information on the payments to Khalil, Jawhary, and
Fulaij as well as the statement that the three men held stock in First
American as nominees for BCCI.

Altman asserted on more than one occasion in interviews with P.T. in
the first half of 1991 that First American was not a source of funds for
BCCI. The information on Mathias’s plan to install Volcker as trustee
comes from P.T.’s interviews with the two men and with Michael
Bradfield, the Fed’s general counsel.

The main source for Abu Nidal’s dealings with BCCI is Seale. Time's
“black network” story ran in its July 19,1991, issue. Sartaj Asis’s remarks
appeared in the FT, July 24, 1991. Masihur Rahman described the threats
he received in his August 8, 1991, Kerry Committee testimony and in
interviews with P.T.

Jam Sadiq Ali’s statement that Abedi would not be extradited was

Notes on Sources

482 )

reported in the WSJ on August 1, 1991, based on an AP dispatch. The
assistance Jam Sadiq Ali had received from Abedi was reported in an
October 23, 1991, WSJ story by Tom Petzinger and P.T.

14: Clifford and Altman

The description of Harriman’s book party is from the WP \ May 23, 1991,
and an interview with one of the guests. Clifford made his remark about a
“criminal conspiracy” in his October 24, 1991, testimony to the Kerry
Committee. Kinsley’s column appeared in the New Republic , April 4,
1991. The Globe's story on the Altmans appeared on April 9, 1991.

P.T. and L.G. attended the September 11, 1991, hearing. The account of
it is based on their notes and on a transcript. Wylie’s remark about
Clifford’s abilities as a salesman appeared the next day in the WP.

Skadden’s role in the Financial General case is made clear in documents
and newspaper accounts concerning the takeover fight. The WSJ 's Jill
Abramson and P.T. wrote about it on September 11, 1991. P.T. inter¬
viewed Robert Bennett and Peter Brown as well as sources at Skadden
who requested anonymity.

Quesada’s remark that he couldn’t remember approving the Clifford-
Altman stock deal appeared in the WP, May 5, 1991. The information on
loans to board members comes from a list of insider loans supplied to the
authors.

P.T. and L.G. attended the October 24,1991, Kerry Committee hearing;
the account of it is based on their notes and on a transcript. Many of the
documents showing BCCI’s close ties to First American Bank of New York
were released at the hearing and reprinted in the hearing record.

The section on clues to BCCI’s role is based on the following sources.

• Altman’s statement that the Arab investors were not told about the
buyout of the Virginia bank’s minority shareholders is from a July

23, 1988, deposition. He was deposed in the shareholder suit.

• Altman described BCCI’s pervasive influence at NBG in his October

24, 1991, Kerry Committee testimony.

• Abedi’s role in the hiring of Stevens was first reported publicly in the
WP, February 3, 1991. Several additional examples are contained in
the Fed order of July 29, 1992.

The section on dubious statements by Clifford and Altman is based
on the following sources.

• Helms’s query to Clifford was a written question inserted into the
record of Kerry’s October 24, 1991, hearing.

• Clifford’s letter to the Fed about the Darwaish affair is dated August

Notes on Sources

( 483

16, 1992. It was released by the Fed (along with other documents)
in response to a Freedom of Information Act request. Clifford’s
affidavit to the Kerry Committee is dated February 7, 1992.

• Altman’s statement that the law firm’s relationship with Abedi
stemmed from its “international practice” is from the WP, October
8, 1984. It was in their September 1991 House Banking testimony
that Clifford and Altman said that Lance introduced them.

• Lawyers for First American described the company as foreign-owned
on several occasions during the Virginia litigation. For example,
during a pretrial hearing on September 16, 1988, one attorney, John
Stump, described the owners as “non-United States citizens.” When
the U.S. magistrate, W. Harris Grimsley, asked if they were “majority
shareholders,” Stump replied, “They’re 100 percent shareholders of
the holding company.” Stump, of course, was acting at the direction
of Clifford and Altman.

• Altman said in a July 1989 interview with L.G. that he had been to
only one of BCCI’s annual management conferences. He amended
his story in a March 1990 interview with L.G.

• First American’s comment on the Noriega checks appeared in the
WSJ, May 3, 1990.

• The Sami telex and the invoice from Clifford’s firm were found by
the Kerry Committee.

• The information on C-Chase money through First American is from
the Burris affidavit.

The sources for some of the statements about BCCI’s role vis-a-vis
First American are cited in the text. The other sources are listed below.

• Altman’s letter to the Richmond Fed was dated November 24, 1978.

• The April 1987 remark is from MEED, April 4, 1987.

• Altman’s remark to the WP appeared on October 13, 1988.

• The July 1989 remark was made in an interview with L.G.

• The March 1990 remark was made in an interview with L.G.

• The WP story quoting Clifford appeared on February 3, 1991.

Sakhia made his comment about communicating with the shareholders
in his October 22, 1991, Kerry Committee testimony. The Howrey &
Simon partner was quoted in the WP, November 4, 1991.

15: The Watchdogs

Schumer was quoted about the Justice Department’s timing in the WP,
September 6, 1991. The Schumer Report is the source for all of the
examples of lack of follow-up; some details of the Iranian case come from

Notes on Sources

484 )

an AP report dated August 16, 1991. Schumer’s new findings were re¬
ported in the NYT on August 27, 1992. Mazur compared the C-Chase
team to a reconnaissance squad when he testified to the Kerry Committee
on November 21, 1991.

Dexter Lehtinen testified before the Kerry Committee on May 14,1992.
He was also interviewed by P.T., as was James Dougherty, the lawyer for
the Lloyd’s of London syndicate that sued Bilbeisi.

The Justice Department official mentioned his “three rules” in an inter¬
view with P.T. Ambassador Hussain was interviewed by P.T. in Wash¬
ington in late 1991.

Gonzalez made his remark about a “stealth banking operation” in his
opening statement at the September 11, 1991, hearing of the House
Banking Committee. BCCI’s illegal telemarketing program was reported
in Newsday on July 31, 1991; the story was based partly on an AP
dispatch. Bailey commented on the Fed’s powers in his May 23, 1991,
testimony to the Senate Banking Committee.

Beith’s criticism and Leigh-Pemberton’s response occurred at a July 23,
1991, hearing of the Treasury and Civil Service Select Committee of the
House of Commons. Jaans’s remarks are from an interview with P.T.
Leigh-Pemberton’s statement that BCCI was not viewed as “crooked”
appeared in the FT, July 13., 1991.

Lewis’s description of the favors offered by BCCI appeared in the Miami
Herald , August 4, 1991. The information on his use of CenTrust’s plane is
from M, Inc., March 1991. The “finder’s fee” to Muriel Siebert was
reported in a March 22, 1991, WSJ story by P.T. and Jill Abramson.

The examples of federal bank regulators joining law firms that did
business with BCCI or First American are from a September 6,1991, story
in the WSJ by P.T.

Bench testified before the Kerry Committee on February 19, 1992, and
his various roles at OCC and PW have been described in P.T.’s interviews
with Bench, OCC officials, and former BCCI executives.

Morgenthau’s allegation that BCCI bribed Peruvian central bankers
was made in the July 29, 1991, press conference at which he announced
the indictment of BCCI. One year later, allegations of bribes to several
other central bankers were made in a Morgenthau press conference and in
the “enterprise corruption” indictment announced at that time.

Bilgrami’s account of his shopping trip with the Sudanese central banker
is from Bilgrami’s July 30, 1992, testimony to the Kerry Committee.

The allegation about BCCI’s giving rugs to a Bank of England official is
contained in notes made by an investigator during a 1991 interview with
Jahavanger Masud in London. The investigator worked for a law firm that
represented BCCI depositors.

Abedi’s remark about the Bank of England and NatWest appeared in the
FT, August 8, 1991.

Notes on Sources

( 485

The WP’s report on Thornburgh’s position regarding corporate crime
appeared on April 28, 1990. Blum talked about influence peddlers in his
August 1, 1991, Kerry Committee testimony.

1 6 : The Politicians

The information on Ed Rogers is taken mainly from the Kerry Report; one
Kerry staff member told the authors that he thought Rogers’s explanation
was shallow and unconvincing. Additional information is from P.T.’s
reporting for the WSJ. Safire’s remark is from a November 28, 1991,
column about Rogers.

President Bush’s remarks are from the White House transcript of his
press conference. The Adham interview was carried on Middle East News
Network on January 18, 1992. The allegation that the CIA sold planes to
Skyway was made by Charles (“Bill”) White, the estranged business asso¬
ciate of Bath’s.

Irvani’s letter to Baker (and the cover note from Helms) were released by
the Kerry Committee. Stephens’s financial backing for Bush was reported
in the WSJ by Tom Petzinger, P.T., and Jill Abramson on December 6,

1991. Stephens discussed the Riadys in an interview with P.T. in early

1992. Scowcroft’s financial disclosure statements reveal that he is an
investor in a partnership based in Washington, D.C.; P.T. was told by
several sources that the partnership has done business in Pakistan.

Dillon, Read’s work for Sonatrach was discussed in an article by L.G.
for the October 1979 issue of Institutional Investor. Emerson described
Clifford’s work for Sonatrach. Von Raab made his remarks in a February
1991 interview with L.G.

A former BCCI official told P.T. about Jeb Bush’s social ties with Sakhia.
Bush confirmed to P.T. that he knew Sakhia but declined to discuss their
social relationship. BCCI is identified as a lender to Duque in internal
records. The Harken Energy deal was described at length in the WSJ story
by Petzinger, P.T., and Abramson cited above.

Information on campaign money from Clifford, his law partners, and
Lynda Carter is from press reports and Federal Election Commission
records.

Dingell’s mortgage is reported on his congressional disclosure form.

Nunn discussed his meetings with Pharaon in a telephone interview
with P.T. in August 1991. A spokesman confirmed the friendship with
Jones.

Both authors interviewed Senator Hatch, L.G. in 1990 and P.T. in 1991.
The NBC report on Hatch’s ties with Hammoud was broadcast on Nov¬
ember 26, 1991. WSJ stories on Hatch appeared on November 21, Nov¬
ember 27, and December 3, 1991. Pillsbury talked extensively with P.T.

Notes on Sources

486 )

Hatch’s office provided his statement in reply to NBC’s report on Novem¬
ber 27, 1991. The authors obtained copies of Hatch’s July 31, 1986, letter
to Peter O. Stearns at the FSLIC. Hatch’s financial disclosure statements
contain the information on the apartment managed for him by Hourani.
Tom Petzinger of the WSJ provided the notes of his December 3, 1991,
interview with a spokesman for Hostler for the December 6, 1991, WSJ
story on Harken. Details of Pillsbury’s dealings with BCCPs represen¬
tatives are contained in the Kerry Report.

Information about Hammoud’s death comes from medical reports ob¬
tained or reviewed by P.T. and from interviews with a lawyer for a member
of the family. Chinoy said in his March 13, 1992, Kerry Committee
testimony that he didn’t believe Hammoud was dead. A U.S. government
investigator discussed Hammoud’s activities in Washington, D.C., with
P.T. Separately, another person involved with the Hammouds allowed P.T.
to read Violette Hammoud’s account of her husband’s death. PT. obtained
the documents relating to the Altman-Pillsbury meeting at the Helmsley
Palace. The Hammoud telephone intercept was reported in Newsweek,
August 10, 1992; information consistent with that report was provided to
P.T. by a law enforcement source.

Von Raab mentioned the CIA report to L.G. and in an interview on
ABC-TV’s Nightline broadcast on July 15, 1991. The 1986 CIA memo
was obtained by the authors. There was extensive discussion of it in
Mulholland’s February 19, 1992, testimony before the Kerry Committee.

Gonzalez’s remarks about the parallels between BCCI and BNL were
made at the September 11, 1991, hearing of the House Banking Commit¬
tee. P.T. reported on Hartmann’s connections in the WSJ on September 13
and October 7,1991.

Information on the possible whereabouts of the Gokal brothers was
provided by former BCCI officials and sources in Switzerland. Seymour
Glanzer, a lawyer for the Gulf Group and for Abbas Gokal, told the
authors that he did not know how to reach them.

The awarding of banking licenses to Shoaib and Nawabi was reported
in an October 23, 1991, story for the WSJ by Tom Petzinger and P.T. The
SEC’s suit was reported in the WSJ, May 7, 1992.

Much of the material for the rest of the chapter is from PW reports, the
Fed’s July 29, 1992, order, newspaper accounts, P.T.’s interviews with
Elias (and other big creditors of BCCI), and P.T.’s reporting of the U.S.
court developments for the WSJ.

17: Rounding Up the Suspects

P.T. talked with Albright and people who know him, including his lawyer,
Sol Corbin. In interviews conducted by P.T., sources at the Fed and other

Notes on Sources

( 487

regulatory agencies described the squabbling over the issue of the trustee
for First American. The authors obtained Judge Green’s order of June 23,
1992, from the court.

The details of the Bin Mahfouz investments in BCCI and First American
are set out in the Fed’s July 8, 1992, order against Khalid Bin Mahfouz.
The PW report of June 22, 1991, on ICIC and WSJ stories based on it
(published in February 1992) were also sources for the section on Bin
Mahfouz.

The New York State indictment of Bin Mahfouz and Kahlon and P.T.’s
reporting of the July 2,1992, press conference to announce it were sources
for this section of the chapter. An NYT story by Elaine Sciolino and Jeff
Gerth on August 2, 1992, brought together many of the recent develop¬
ments in U.S.-Saudi relations over banking matters in general and Na¬
tional Commercial Bank (NCB) in particular. P.T. also drew on his back¬
ground knowledge of Saudi Arabia and its banks. (In the early 1980s, he
conducted interviews with officials at NCB and other Saudi banks.)

Information about the raids in the Cayman Islands comes from separate
interviews with a lawyer and an investigator who visited the colony
around the time of the raids.

The section of the chapter on the events leading up to the July 1992
indictments was based mainly on reporting by P.T. and his WSJ colleagues,
including Jonathan Moses. Most of the examples of evidence against
Clifford and Altman are from the Fed order of July 29, 1992.

Information relating to the plea negotiations of Adham and Jawhary is
from P.T.’s interviews with lawyers involved in the case.

P.T. attended Clifford’s and Altman’s meeting with the press and the
subsequent hearing. Again, the authors are indebted to Moses for report¬
ing on some of the events in New York.

Written statements by Aslam (with some supporting documentation)
are the basis for the final section of this chapter.

Epilogue

Institutional Investor published its interview with Abedi in January 1983.
Former BCCI officers described Abedi’s preoccupation with appearances.

As noted in Chapter 5, Bill Kovach, formerly of the Atlanta Constitu¬
tion, is the source for how Carter spoke of Abedi; Kovach was quoted in
the LAT on July 28, 1991. Abedi’s quotes are from a July 16, 1991, WSJ
story by John Bussey, based on his reporting in Pakistan in the days after
the seizure of BCCI; Abedi’s remark on God is from the WSJ , July 30,
1991.

Information on Hammoud’s borrowing from BNL is from congres¬
sional investigators.

Notes on Sources

488 )

P.T. reported on the legal problems of Clifford and Altman for the WSJ
and attended Judge Green’s September 10, 1992, hearing.

Brown’s involvement with Patton, Boggs & Blow was discussed in a
WSJ article by Jill Abramson on July 9, 1992. The information on the real
estate portfolio is from a May 10, 1992, WSJ story by Tom Petzinger.

A study by the National Library on Money and Politics, reported in the
NYT on July 27, 1992, is the source for campaign money from employees
of Stephens Inc. and other firms. The Center for Public Integrity’s report of
February 1992 is the source for Hill and Knowlton’s people working in the
Clinton campaign. The section on Hillary Clinton’s work for Stephens is
based on a court filing; at that time Clinton used her maiden name (Hillary
Rodham) professionally. The information on the FBI probe is from inter¬
views conducted by P.T.

The Center for Public Integrity’s report is the source for James Lake’s
various roles and his fees from the Abu Dhabi interests.

Mattingly’s comment that he received no adverse information from the
CIA is from his September 13, 1991, testimony to the House Banking
Committee. He told the Kerry Committee staff that the Fed was not told
about the liaison roles of Adham and Khalil. Volcker’s comment is from
the Kerry Report , which cites Volcker’s March 1991 testimony to the
Senate Banking Committee. Mulholland testified about the 1986 CIA
report before the Kerry Committee on February 19, 1992.

Federal prosecutors in Tampa told L.G. and P.T. in interviews that the
CIA provided no information about BCCI during the C-Chase case. Rob¬
ert Gray’s intelligence connections are discussed at length in Trento.

Barcella’s role in giving a legal opinion related to an arms deal was
disclosed in a story by Lyn Bixby for the Hartford Courant on May 29,
1992; the story is also the source for diGenova’s comment. Barcella’s
comments are from an interview with L.G.

Hatch’s trip to China is from a series on the Afghan operation by Steve
Coll of the WP 9 published on July 19 and 20, 1992.

The CIA’s possible role in encouraging the establishment of BCCI is
from L.G.’s interviews with a former BCCI official in 1990 and 1992.

Warnke’s comment on different values appeared in the WP 9 July 30,
1992. The quote on Abedi is from a Kerry staff interview conducted on
October 9, 1991. Kerry’s remarks are from an interview with L.G.

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Index

Abbas, A., 191

Abboud, A. Robert, 33, 142-43, 366

Abdullah, Prince (son of King Faisal),
38

Abedi, Agha Hasan, 1-4, 419-20,

423, 435; and Adham, 11, 121;
and Altman testimony, 344-45;
and Aslam, 389-91, 414; and Bank
of America, 11-12; banking prac¬
tices of, 184; and Baqi, 66; and
BCCI capital enlargement, 196;
and BCCI founding, 2, 417-18; on
BCCI shareholders, 27; and BCCI
shutdown, 329; and BCCI’s inter¬
national spread, 12, 17, 19; on
BCCI success, 183; as BCCI sym¬
bol, 21; and British banking regula¬
tion, 29; as business-spiritual
leader, 20-21, 22-23, 155, 156,
163, 435; and Casey, 133-34; and
CIA, 123, 432; and Clifford, 75,
410; corruption skills of, 433; and
Cromwell Hospital, 66; deposits
sought by, 17; and Ernst &: Whin-
ney demand, 205-6; Fed bars from
U.S. banking, 319; First American
lawsuit against, 194; heart attack
and illness of, 230-31, 292, 421;
and ICIC, 325; indictments
against, 320, 350-51, 35 m, 407,
408, 421; as intellectual, 19; inter¬
view given by, 419; as Kidder Pea¬
body client, 3 52; on loans to for¬

eign governments, 167; and
Mazrui, 387; and oil shock, 9; and
other banks, 424; and Pakistan,

10; and Pharaon, 11,38, 67; pri¬
vate life of, 19; remains on payroll,
303; resignation of, 304; staff
benefit fund raided by, 313; and
U.S. aid to Pakistan, 132; and
Zayed, 1, 8, 10-11, 14, 25, 63, 79,
158, 292; and Zayed’s investment
committee, 417

AND PROMINENT PEOPLE, 78; and
Abedi as international contact,
100-101; and Altman wedding,

99; bribes to, 360; in Britain, 87,
360-61; Carter and Young, 83-87,
95, 96, 100,152, 360; as door
openers, 95-96; Hart, 115; Jack-
son, 116-17; in Pakistan, 79-83,
100; and procurement for Zayed’s
entourage, 79; and Saudi efforts in
U.S., 104; and Third World Foun¬
dation, 88-89

AND U.S. EXPANSION OF BCCI, 34-
35, 63, 64; Aslam on, 412-14; and
FGB (First American), 41, 43, 46-
47, 47-48, 128, 388, 390-9T 405;
and Lance, 30, 31, 37, 41, 83, 109.
See also Bank of Credit and Com¬
merce International
Abedi, Maha, 19, 83-84
Abedi, Rabia, 19, 84, 329, 421
Abu Dhabi, 5; as Abedi training

( 495 )

Index

496 )

Abu Dhabi (cont.)

ground, 433; and banking, 28; and
BCCI liquidation, 393, 394-95;
BCCI move to, 293, 303; BCCI
shareholders from, 194, 195; and
BCCI shutdown, 309, 309n, 312,
317, 318, 323, 324, 329; BCCI
stock to, 292; and British, 120; and
College of Supervisors emergency
meeting, 307; development of
(1970s), 9, 23; financial support
for BCCI from, 305, 394; noncoop¬
eration from, 408, 424, 434; oil
revenues of, 14; oil wealth of, 9;
and Pakistan, 10; post-shutdown
advertisement by, 318; United
Bank branch in, 8; and Zayed, 5-8,
9 (see also Zayed bin Sultan al-
Nahyan, Sheikh)

Abu Dhabi Investment Authority, 51,
84, 194, 207, 292, 306, 318, 345,
386, 387,417

Acoca, Maurice, 278

Adams, Whitney, 259

Adham, Kamal, 48-49, 106, 118-21,
130, 403-4, 424; and Abedi, 11;
and Altman on BCCI, 344; and
Ameen, 370; in AslanTs account,
414, 415; and Attock Oil, 66; and
Bin Mahfouz, 401; and Bush, 117,
129, 363; and cable television exec¬
utives, 151; and Camp David peace
process, 108, 121; and Capcom,
147, 149, 153, 205; Capital Fund
and family of, 150; and CIA, 152,
429, 431; Clifford on, 54-55, 55n,
344; and Clifford-Altman prosecu¬
tion, 406; and Close, 129; and
King Fahd, 108; and Federal Re¬
serve hearing, 56, 57; in Federal Re¬
serve order, 321; and Fox, 150; and
Global Chemical Systems, 148; and
Khalil, 146; and Khashoggi, 105;
and KIFCO, 8on; and Kissinger,

141; and loan liability, 196; loans
to, 290; London apartment of, 14,
403; in N.Y. indictment, 320; and
Pharaon, 38, 69; potential losses
on accounts of, 304; Rogers’s and
Barbour’s contract with, 362-63
and BCCI, 123-24, 1 58; as
beneficiary of diversion, 427; and

Cayman branch, 200; money to,
204; as shareholder, 194; treasury
department dealings, 200
and FGB-First American, 41, 54,
108-9, 119, 388, 412-13; and
CCAH, 5 1; and CIA, 128, 130;
countersuit filed by, 47; public no¬
tice of, 74; role in, 75, 321-22;
Safire on, 46; SEC suit against, 43;
Sheikh Sultan’s stock to, 5 in; and
Symington, 50; on tender offer doc¬
ument, 61

Advance fee fraud, 170, 171
Afghanistan war, 131-32, 132-33,

143, 159, 160,430-31
Afridi, Aijaz, 76, 77
Afridi, M. A. K., 389
Afro Caribbean Connections, 211
Agnew, Spiro T., 105-6
Ahmed, Iqbaluddin, 360
Ahmed, M. M., 141, 272
Ahmed, Naziruddin, 82, 360
Ahmed, Rashid, 82, 360
Ahmed, Sani, 30, 97
Aitken, Jonathan, 145
Ajman, 5,9, 51

Akbar, Syed Ziauddin Ali, 199-202,
203-4, 240-41; and Awan informa¬
tion, 243; and cable television exec¬
utives, 15 1; as Capcom head, 66,

147, 205, 234, 245; and Capital
Fund, 150; indictment and arrest
of, 247, 249n, 262, 347n; and TCI,

148, 149; trial of, 278
Albright, Harry W., Jr., 396
Alcaino, Roberto, 233, 242
Algeria, 111,367

Ali, Iftikhar, 82
Ali, Jam Sadiq, 329
Ali, Majid, 1-2, 413
Ali, Tariq, 17, 90, 261
Allen, Richard, 113
Allende Gossens, Salvador, CIA in
overthrow of, 126

Altman, Lynda Carter, 99-roo, 332,

333> 3^7> 37G 374> 4 2 ^

Altman, Robert A.: and Adham, 321;
Awan on, 242, 243, 244; at BCCI
conferences, 343, 405; as BCCI
leader, 253; in BCCI legal defense,
253-54, 259-60, 267, 268, 272,
275, 276; and Bush administration

Index

figures, 3 67; cabinet members as
friends of, 117; and Cayman
entities’ stock, 231; on concession¬
ary loans, 76; and Dingell, 372;
and Federal Reserve investigations,
291, 300, 301; on First American-
BCCI relation, 325; on First Ameri¬
can board, 60, 75, 76, 99, 337;

First American defended by, 3 24;
on First American’s purchase of
NBG, 69, 70; First American stock
deal of, 301-2, 302n, 341, 352,
378, 405-6; and First American
(FGB) takeover, 51, 54, 56, 57, 59,
59n, 266, 302n, 417; and
Greenspan, 359; and Hatch, 374-
75; as Kerry contributor, 272, 434;
as Lance’s lawyer, 34, 45, 47; and
McGee story, 298; and Manhattan
D.A.’s investigation, 299; and
Mankievvicz, 272n; marriage of,
99-100; and media exposes, 294,
295; and NBG ties to BCCI, 72;
Pillsbury message to, 380; politi¬
cal contributions by, 371; post¬
shutdown lawsuit against, 315;
resignation from First American,
326; on secrecy over First Ameri¬
can investors, 74; and Senate inves¬
tigation of BCCI, 240, 243, 244-
45, 254; von Raab on, 272
AND BCCI SCANDAL, 404, 424;

Aslam on, 411-17; and clues to
BCCI role, 340-41; congressional
hearings on, 333-40; and credi¬
bility, 342-45; defensiveness over,

3 31-3 2; and evidence on BCCI-
First American connection, 405;
and evidence of lying, 405-6;
federal indictment of, 406-7,
408-9; indictments answered,
408-11; New York State indict¬
ment of, 406, 407-8; trials,

424-26

Alya Holdings, 174

Ameen, Michael, 370

American Arab Affairs Council, 112

American Security Bank of Washing¬
ton, 324-25

American Southern Companies, 70

American Southern Insurance Com¬
pany, 3 53 n

(497

American Telecommunications Corpo¬
ration (ATC), 150
Americas Coordinating Committee,
340

Amery, Julian, 87, 120
Amin, Idi, 16, 87
Anderson, Jack, 34n, 123, 126
Anderson, Randy, 377
Anguilla, Arab Overseas in, 170
Anti-Semitism, and BCCI on legal
troubles, 261-62
Anwar, Saghir, 81-82, 124
Arab Bank Ltd., i82n
Arabian Industrial &C Commercial
Company, 406

Arab-Israeli War (1973), x 4> 49-50
Arab Overseas Bank and Trust Com¬
pany, 170
Arafat, Yassir, 115
Aramburo, Tony, 177
Araujo, Munthur, 179
Arbusto Energy Inc., 369
Arent, Fox, Kintner, Plotkin Kahn,
2 - 54 , 2-94

Argentina, 166, 213, 216, 408
Armacost, Michael, 113
Armacost, Samuel, 12, 113
Arms dealing, 178-80, 422
Armstrong, Scott, 130
Arnold & Porter, 256, 359
Arthur Andersen, 393-94
Asghar, Masood, 90-91
Ashraf, Iqbal, 247, 248, 262, 269
Asis, Sartaj, 328

Aslam, Riaz Saleem, 61, 6in, 199,
389-91,412-17

Asset International Management
(AIM), 174, 175
Assir, Abdul Rahman el, 214
Associated Shipping Services Ltd., 25
Attock Oil, 36, 66, 77, 80, 124, 163-
64,238,293,321,322, 403
Atwater, Lee, 366
Auditors. See Ernst &: Young; Price
Waterhouse
Avenel project, 113-14
Avramovic, Drag, 97, 98
Awan, Amjad, 124, 220-24, 234-35;
on BCCI “inner circle,” 263; on
BCCI ownership of First American
and NBG, 265, 286; and Bilbeisi,
181; and Blum investigation, 239,

hide x

498 )

Avvan, Amjad (cont.)

241;on Clifford and Altman’s inter¬
ference, 243, 254; deposition of,
250; indictment and arrest of, 247,
248-49, 262; and Justice Depart¬
ment attitude, 286; and Kerry Com¬
mittee, 240, 246; and Mazur-
xVlusella, 229, 234, 242-44,

245-46, 265, 286; and Noriega,
225, 239, 245, 254, 274, 275, 277;
testimony from, 434; trial of, 277;
as unindicted co-conspirator, 236
Awan, Ayub, 124, 221
Avvan, Khalid A., 239
Ayub Khan, Mohammad, 88

Baakza, Asif, 247, 249n, 262, 278
Babangida, Ibrahim, 162, 164, 164-65
Bacchus, Jim, 334
Bahamas, 21 in, 218, 234
Bahrain, 14, 18, 132, 194, 369-70,
379, 399

Bailey, Norman, 153,432
Bailey, Sidney, 54, 57, 355
Baker, James A., Ill, 365, 382
Bakhsh, Abdullah Taha, 370
Balance sheet of BCCI, 193
Bamieh, Sam, 364, 366, 366n
Banca Nazionale del Lavoro (BNL),
139-41,143, 383-84
Banca Privata Italiana, 11311
Banco Ambrosiano, 323, 355
Banco de Credito y Comercio de Co¬
lombia, 212

Banco de Descuento S.A., 64
BancOhio Corporation, 60
Banco Mercantil, 21 2
Banco Nacional de Panama, 209, 236,
237

Bandar bin Sultan, Prince, 104, 108
Banerjee, Ben, 137
Bangladesh, 2, 156-57, 3 12-13
Bankers Trust Company, 73, 340, 341
Bank Leumi le Israel, 179
Bank Melli, 1 37

Bank of America, 11-12; and Clausen,
98; post-shutdown lawsuit against,
315; and Third World, 166; ljaz
Zia-ul-Haq hired by, 82
and bcci, 27, 29-30, 186; Abcdi’s
wooing of, 2, 11, 1 2; and BCCI
lending practices, 48, 186; and Clif¬

ford, 336; documents of on BCCI
operations, 48, 58; and National
Bank of Oman, 18, 30; and U.S. ex¬
pansion, 34-35

Bank of Commerce, 35-36, 59, 358

Bank of Credit and Commerce (Emir¬
ates), 26, 210, 317

Bank of Credit and Commerce (Hong
Kong) Limited, 18, 365-66

Bank of Credit and Commerce
(Zimbabwe), 93

Bank of Credit and Commerce Interna¬
tional (BCCI); Abedi as head of,

11, 17, 21,417-18 (see also Abedi,
Agha Hasan); annual reports of,
253, 291, 292; assets of, 64, 391-
92; as “Bank of Crooks and Crimi¬
nals,” 286; as bank without a coun¬
try, 94; and Bilbeisi deals, 179-82;
and BNL affair, 139-40; and Bush
or associates, 363, 364, 365; and
Capcom, 147-49, 150, 15 *, J 53 ;
in CenTrust ruse, 72; and CIA,

129, 133-34, 153,381-82,429-
3 2; corporate airplane of, 84-85;
cult atmosphere in, 21, 22; deposits
of, 188, 197, 203-4, 313, 3 I 3 n ?
and difficult markets, 210; and
drug trade, 160; employee con¬
ferences of, 22-23, 77, 249; and
Ershad in Bangladesh, 1 56-57; fac¬
tionalism in, 26, 229, 230, 253,

292; faults of, 165, 183; fraud and
misconduct of, 197, 391-92, 420,
421-23 (seealso Fraud and miscon¬
duct by BCCI); and interbank mar¬
ket, 188; and Iran, 137-38; and
Iran-contra affair, 135-36; as Kid¬
der Peabody client, 352; lending by,
2-9, 35, 4*<, 188-93, 289-90, 387
(see also Lending by BCCI); in Lon¬
don, 12, 1 5; management philoso¬
phy of, 16-17; managerial corps
of, 21; and Noriega, 222-24, 226-
27, 263-64 (see also under
Noriega); press relations of, 89-93;
restructuring of (1990), 292-93,
303; restructuring of under Mazrui
(1991), 304-5, 306-7, 308, 309,
394; satellites of, 65-67, 72, 296-
98; secrecy around, 17; shutdown
of, 307-10, 311-18 (see also Shut-

Index

down of BCCI); and TCI, 145,

148, 151, 152; and Third World,

1 55-56, 417-18, 421-22 (see also
Third World)

CRITICISMS AND SUSPICIONS OF,
26-27; in Ali expose, 90; bank ex¬
aminer report (Vaez), 187-89, 192,
355-56; and FGB takeover, 52-53,
58-59; by Mascarenhas, 91, 143;
by Mellon Bank, 238-39; by Singa¬
pore authorities, 96

DEPOSITORS OF: DRUG DEALERS AS,
208; ethnics in Britain, 16; as fraud
and theft victims, 197, 198, 339,
421-22; and liquidation, 392, 393,
394; migrant workers in Persian
Gulf, 16; oil-rich Arabs, 14-15; as
shutdown victims, 313-16; Third
World central banks and govern¬
ments, 165-66, 315; Zayed, 23,

195

founding of: and Abedi, 2, 417-
18; and Bank of America, 11-12;
capital for, 12; and oil price rise,

12; and Zayed, 10-11

growth of, 15-16, 17, 63-64, 419;
Abedi’s boast of, 183; Abedi’s ob¬
session with, 30, 169; aim in, 30; in
Britain, 28-29; as cause for con¬
cern, 27-28, 29; international
spread, 17-19; in Latin America,

211-13 (see also Latin America);
and political friends, 95-96; and
U.S., 30, 34-35 (see also United
States operations of BCCI)

SHAREHOLDERS IN, 14, 27, 194;
Abedi agreement with many of,

207; Adham, n, 321-22; Bank of
America, 11-12, 27, 29, 34-35,

186 (see also Bank of America);

Bin Mahfouz brothers, 398, 400;
CIA on, 117; controversial back¬
grounds of, 48-50; and FGB take¬
over, 57; Jawhary, 322; Khalil,

194, 322; as lenders of last resort,
193; list of released, 400; loans to,
290; Pharaon, 11, 194, 216; Saudi
contacts of Pharaon, 38; Zayed,

27, 57, 186, 193-94
Bank of Credit and Commerce Interna¬
tional (Nigeria) Limited, 162
Bank of Credit and Commerce Interna-

(499

tional (Overseas) Ltd., 190, 248,

269

Bank of Credit and Commerce S.A.,
269

Bank of Credit and Commerce S.A.
Espahola, 64

Bank of England, 316-17; Abedi finds
helpful, 361; and BCCI-First Amer¬
ican loans, 353; BCCI restricted by,
28, 29, 187, 189; and BCCI restruc¬
turing, 293, 305; and BCCI shut¬
down, 311, 317-19,32.3, 357 “ 5 8 ;
bribery allegations about, 423; Clif¬
ford cites as dupe, 336; criticisms
of, 314, 356-58; and First Ameri¬
can ownership, 291; and Moscow
investigation, 300; and Naqvi files,
304; as oblivious, 351, 356; Price
Waterhouse reports to, 202, 289,
303, 305-6, 398-99. See also Brit¬
ain

Bank of Escambia, Pensacola, 287
Bank of New York, 3 8411
Bank of Nova Scotia, 243, 243n
Bank of the Commonwealth (Detroit),
106

Bank Secrecy Act, 259, 332
Banoun, Raymond, 254-55, 273-74,
275,276

Banque Arabe et Internationale
d’Investissement, 52, 64-65, 68,
107, 296-97

Banque de Commerce et de Place¬
ments S.A. (BCP), 19, 175, 205,
370, 384

Banque Nationale de Paris, 297

Banque Paribas, i82n

Baqi, Mohammed Abdul, 66, 164,

4 ° 2-3

Barbados, 165, 21m
Barbour, Haley, 362
Barcella, E. Lawrence, Jr., 254, 257,
258-59, 262, 268, 275, 430, 43on
Barletta, Nicolas Ardito, 224, 294
Barnes, Michael, 294
Barnes, Roger, 305
Barr, William P., 350-51, 383, 404,
43i

Batastini, Bill, 405
Bath, James R., 364-65, 369
Battle, Lucius D., 112
Baxter, Thomas, 321

Index

500 )

BCC Foundation, 82, 84, 144, 156,

161

BCCI. See Bank of Credit and Com¬
merce International
BCCI Depositors’ Association, 394
BCCI Holdings (Luxembourg) S.A., in¬
dictment against, 248
BCC International, 21, 85, 217
BCCI (Overseas) Ltd., 248
BCCI S.A., indictment against, 248
BCCI-speak, 22, 258
Bear Stearns, 203

Bechtel construction company, 106,
127, 367n
Becker, Peter, 71
Beddow, Jack, 60
Beg, H. U., 82
Begin, Menachem, 122
Beith, Alan, 356
Belize, BCCI deposits from, 165
Bench, Robert, 187, 359, 382
Bennett, Sir Frederic, 87
Bennett, Robert, 333, 3340, 373, 409
Betancourt, Belasario, 89
Bhutto, Benazir, 81, i6c^6i
Bhutto, Zulfikar Ali, 2, to, 20, 79-80,
88, 91, 100, 123, 143, 22m
Biden, Joseph R., Jr., 273, 371, 373
Bilbeisi, Fakhri, 139, 180
Bilbeisi, Munther, 139, 176-82, iS2n,
348,350,394
Bilgrami, A. M., 347n
Bilgrami, Akbar A., 212, 388-89; and
Awan, 245; on BCCI “inner cir¬
cle,” 263; and bribery, 360; “house
arrest” for, 262; indictment and ar¬
rest of, 247, 248-49; and Kabbani,
129; and Mazur, 234; Rauh as law¬
yer for, 334n; testimony from, 434;
trial of, 277; on Zayed, 24, 25, 212
Bingham, Lord Justice, 318-19, 386
Bin Mahfouz, Khalid, 60, 75, 107,

112, 206, 207, 364, 365, 369, 370,
397-402, 424; Federal Reserve fine
against, 401, 402; indictment of,
400-401,404,427
Bin Mahfouz, Salim, 206
Bin Mahfouz family, 206-8, 292, 402
Blandon, Jose, 237, 259
Blum, Jack, 164, 237-39, 240-41,

243, 244-45, 246, 250, 25 r, 261-
62, 263, 264-65, 268, 273, 277,

279, 283-85, 286, 287, 288, 296,
328, 361,434

Boeing Company: and Adham, 48-49;

and “commissions,”, 56-57, 57n
Boggs, Thomas Hale (“Tommy”), Jr.,
273,366

Bokhari, Shafquat, 416
Bolivia, “cocaine coup” in, 157
Bond, Richard N., 429n
Bonn, Walter J., 176
Boskin, Michael, 367
Boustead, Hugh, 7
Bouterse, Desi, 165
Bradbury, Curt, 41
Bradfield, Michael, 61, 417
Bradlee, Benjamin, 62
Bradley, Bill, 371
Bradley, John A. K., 425, 426
Brady, Nicholas, 367, 368
Brandt, Willy, 88, 89
Brasher, James, 86
Brazil, 168, 213

Bribery, 36n, 37, 105, 166, 209, 226,
261, 262, 284, 320-21, 360, 408,
423. See also Corruption
Britain: Abedi’s connections in, 87,
360-61; Arab spending in, 14-15;
as banking center, 15; and College
of Supervisors, 289; deposition-
strategy session in, 414; ethnic mar¬
ket in, 16; libel laws in, 260-61;
Noriega BCCI account and docu¬
ments in, 223, 236, 263, 275; and
Saudi Arabia, 120; and Trucial
States, 5, 8; and UAE, 9; Zayed
builds hospital in, 25; and Zayed in
Abu Dhabi, 7

BCCI in, 15-16, 17, 28-29, 94,

185; bankers arrested, 249n; BCCI-
caused losses, 422; Callaghan de¬
fends, 276; defendants, 262;
downsizing, 292-93; and entertain¬
ment for Pakistani officials, 81;
expose of, 261; headquarters
moved to, 12; investigations and ar¬
rests, 402-4, 423; liquidation, 393,
395; move from, 293, 303; investi¬
gation, 251; shutdown, 311,312,
313-15. See also Bank of England
British Bank of the Middle East, 8
Brooks, Jack, 330
Brown, Hank, 339

Index

Brown, Peter, 334n
Brown, Ronald H., 273, 428, 4i8n
Brown Brothers, Harriman & Com¬
pany, 99

Bruce Campbell & Company, 125
Bruna S.A., 25

B.R.& W. Industries Ltd., 137
Burris, David, 286, 287
Bush, Dorothy, 368
Bush, George, and Bush administra¬
tion, 78, 363, 364, 365, 366; and
Abedi, 117; and Adham, 129; and
Altmans’ social circle, 100; and
BCCI associates, 428, 429; BCCI
knowledge denied by, 368; and
BCCI relation to prominent figures,
367; and BNL affair, 139, 140,

141, 383; as CIA director, 129-30;
and grand jury testimony, 426; and
Hostler, 378; and Iran-contra af¬
fair, 142, i42n; and Operation C-
Chase conclusion, 247, 250; reti¬
cence of over BCCI scandal, 427
Bush, George W., 365, 368-70, 433
Bush, John E. (“Jeb”), 96, 117, 368,

433

Bush Klein Realty, 368

Cable News Network (CNN), 145
Cacheris, Plato, 49n, 322, 404
Caddell, Patrick, 107, 116
Calderon, Steve, 177, 180
Calero, Adolfo, 179
Calhoun First National Bank, 31,32,
34 n

Callaghan, Lord (James), 83n, 87, 96,
100, 276, 336, 360
Calvi, Roberto, 355
Calvo, Alberto, 20-21,212,213,216
Camarena Salazar, Enrique (“Kiki”),
232

Camari Corporation, 165
Cambridge University Common¬
wealth Trust, 87

Cameroon, 165, 203-4, 315, 408
Caminos Transoceanicos Naviera
S.A.,25

Campaign financing reform, need for,

434

Camp David peace process, 122; and
Adham, 108, 122-23
Canada, 19, 220, 393-94

( 5 °!

Capcom Financial Services Ltd., 66,

77, 147 - 49 , 150, I 5 U 153 , 197 ,
200, 203, 204, 205, 234, 431; and
Adham, 321, 322; Akbar as head
of, 66, 147, 205, 234, 240, 245;
and alleged Akbar payoff, 24 m;
and Awan plans, 245; and Dingell,
371; Richard Fear payments from,
403; and Gurwin investigation,

293; indictments against, 248,

347n; Khalil as shareholder in,

322; and plea bargain, 349n
Capital flight, 158, 166-69, 211
Capital Fund, 149-50
Cargill, I. P. M. (“Peter”), 97
Carlson, Roy P. M., 11-12, 67, 69,

86, 127-28, i28n, 255
Carlucci, Frank, 364
Carroll, Ruth, 380
Carse, David, 312

Carter, Jimmy: and Abedi, 83-87, 95,
107, 108, 230, 360, 420; BCCI ties
to, 78, 100, 276; and Camp David
Accords, 121-22; and Clifford, 44,
98, hi, 336; and Democratic
convention, 428; and Fahd, 103;
and Fuqua, 354n; and Lance, 31,
32-34, 36, 39, 83; Natelli par¬
doned by, 114; and NBG, 265; and
Pakistan, 132; and Pharaon, 83;
and Rushdie’s Satanic Verses , 108;
and Saudis, 107-8; and Turner,

152.

Carter, Lynda, 99-100. See also Alt¬
man, Lynda Carter
Carter, Rosalynn, 84
Carter Presidential Center, 84, 86-87,
108

Carver, Roy J., 36, 36n
Carville, James, 350
Casey, Eugene B., 40
Casey, William, 126, 128, 129, 131,
133 - 34 . 153 - 54 . 2 35 . 2.57, 42.9-3°
Castle Bank 6 c Trust Company, 124,
i 25 n

Castro, Fidel, CIA schemes to kill, 130
Cayman Islands: BCCI in, 139, 185,
193; as BCCI base, 94; BCCI de¬
posits transferred to, 197; BCCI
holding company in, 12, 17, 190,
193, 21 in, 231, 248, 288, 311;
BCCI liquidation in, 393,

Index

5 02 )

Cayman Islands ( cont.)

395; BCCI loans transferred to,
189-90, 191-93; BCCI shutdown
in, 311; Capital Fund in, 149-50;
cash flown to, 218; and College of
Supervisors, 289^ former Price
Waterhouse officials in, 403; ICIC
in, 27 (see also International Credit
<$C Investment Co. [Overseas] Ltd.);
NBG in, 68; and speculation
through BCCI treasury depart¬
ment, 199-200, 201; Zayed front
company in, 25

CCAH. See Credit and Commerce
American Holdings N.V.

CCAI. See Credit and Commerce
American Investments B.V.

Central America, covert operations in,
* 3 2 , 134

CenTrust Finance Corp., 358
CenTrust Savings Bank, 71-72, 266,
295, 296, 319; collapse of, 296,
422; Hatch on, 373-74; in indict¬
ments, 351; and Kerry, 71, 273n;
and Lewis, 358; and Mattingly tes¬
timony, 353; and Pharaon, 86-87,
295,296, 3^9
Cerezo, Milton, 179
Cerezo, Vinicio, 179
Charles, Sandra, 364
Chase Manhattan, 12, 166
Chawla, Shrichand, 315
Chelsea National Bank, 35, 185
Chemical Bank, 33
Cherkasky, Michael, 284, 300
Chidzero, Bernard, 94
Chile, Allende overthrow in, 126
China, 94-95, 141
Chinoy, Nazir, 80, 117, 136, 169,

246, 247, 249n, 253, 262, 275,
278, 380

Choudary, Mohammed, 313
Choudhury, Bashir, 427
Chundrigar, I. L, 4
CIA: and Abedi, 123; and Adham,

106, 118-120; Afghan rebels sup¬
ported by, 132-33; under Bush,

129-30; and Bush-Adham connec¬
tion, 363; and Durrani claims, 138;
and First American, 152; and Fox,
146; and friendly Arab intelligence
agencies, 130; and Khalil, 401; and

Middendorf, 126; and Noriega,
224; report by sent to Bench, 359;
and Skyway, 364-65
AND BCCI, I 17, 129, 133 - 34 , 153 ,
381-82, 429-32; and Capcom
money transfers, 204; and Noriega,
224; reports on, 286; reticence of
over scandal, 427; and Turner
Broadcasting bailout, 152
Citibank, 12, 166
Clausen, A. W. (“Tom”), 98
Clifford, Clark M., 44-45, 98, 110-
11, 424; and Abedi, 63, 75, 418;
and Adham, 321; and Altman, 34,
45, 99; and Avenel project, 113-
14; Awan on, 242, 243, 244; in
BCCI defense, 253-54, 2.64, 2.67,
272, 274, 278, 434; as Carter Cen¬
ter donor, 84; and Darwaish affair,
61-62; Debbie Dingell on, 372;
and Fed investigation, 300, 301; as
FGB (First American) head, 60, 73,
75,76,98-99, hi, 113, 336,342;
and FGB (First American) takeover,
50, 51, 54-55, 56, 57, 59, 60, 75,
108, 128, 266, 302n, 417; on First
American-BCCI relation, 325; and
First American capital injection,
297-98; First American defended
by, 324, 327; and First American
sale plan, 297; on First American’s
purchase of NBG, 69, 72; First
American stock deal of, 301-2,
3°2n, 336, 341, 352, 378, 405-6;
and Hart, 115; Helms as client of,
126; and Jackson, 116, 257; and
Katzenbach appointment, 326-27;
as Kerry contributor, 272, 434; and
Khashoggi, 105; and Lancegate af¬
fair, 33, 43, 45, 98; lawsuit against,
245n; and McGee story, 298; and
Manhattan D.A.’s investigation,
299; and media exposes of BCCI,
295, 296; memoirs of, 330-31; and
Morgenthau, 281; and National
Bank of Washington, 113, 367;
and Operation C-Chase, 246; and
Pell, 372; political contributions
from, 371,372, 373; poor health
of, 411, 426; post-shutdown law¬
suit against, 315; resignation from
First American, 326; and SEC suit

Index

against “Lance group,” 43, 46; and
Senate probe of BCCI, 240, 243,

245, 254, 260; and Sonatrach,

367; South magazine interview
with, 93; and Vardaman, 280-81;
von Raab on, 272

and bcci scandal, 404; Aslam on,

411-17; and clues to BCCI role,

340-41; congressional hearings on,
333-40; and credibility, 342-45;
defensiveness over, 331-32; and ev¬
idence on BCCI-First American
connection, 405; and dubious state¬
ments, 405-6; federal indictment
of, 406-7, 408-9; indictments an¬
swered, 408-11; and memoirs,

331; New York State indictment
of, 406, 407-9; trials, 424-26
law firm of: BCCI as client of, 60,

75 ? 985 336 , 343 ? 413; antl BCCI
indictment, 273; and BCCI office,

97; disintegration of, 345-46;

Dutton as partner in, 109; and
FGB, 60; and Helms, 128, 432;
and Hill and Knowlton, 257; and
Irvani, 128; legal fees to, 267
Clifford, Margery (“Marny”), 333
Clinton, Bill, and Clinton campaign,
427-428

Clinton, Hillary, 428
Close, Raymond H., 120, 129
Coffee Inc., 176
Colby, William, 124
College of Supervisors, 289, 307, 353
Colombia, 168, 212, 216-17, 2I 9?

266, 408

Commodity Credit Corporation, 140
Commodity markets, BCCI in, 199-
204

Concessionary loans, 76-77
Conflict of interest: and Clifford-Alt¬
man role in FGB takeover, 333-34;
and FGB-Clifford law firm, 60
Congo, BCCI bribes in, 408
Congress, members of: BCCI’s ties to,
371-77; reticence over BCCI scan¬
dal, 427

Congressional investigations into
BCCI, 328; and credibility of Clif¬
ford and Altman, 342-45; and
Schumer critique of Justice Depart¬
ment, 347-48; Senate Banking

( 503

Committee, Federal Reserve testi¬
mony, 331; Senate Kerry Commit¬
tee, 237, 328, 339-40, 342, 345
(see also Kerry Committee); Senate
Subcommittee on Multinational
Corporations, m-12
HOUSE BANKING COMMITTEE, 332;
Clifford-Altman testimony, 3 33—

37, 426; members’ questions, 337-
3 8; on conduct of First American
board members, 338-39; Fed
officials, 352.-53, 354. See also
Legal proceedings
Connally, John B., 106-7, 116
Control Securities, 87, 324
Cook, Steve, 251
Cooney, John P., Jr., 425
COP (Chiefs of Police National Drug
Task Force), 377
Coronado, Mauricio, 179
Corporate culture of BCCI, 17, 30,
3 i 7 ? 357

Correa da Costa, Sergio, 255-56, 366
Corrigan, E. Gerald, 307, 312, 352,
353 ,

Corruption: and BCCI success, 427; in
BCCI undermining of protective
systems, 422-23, 427; as Kerry
Committee theme, 434; and NBG
takeover, 284

in third world, 157; Nigeria, 161-
62,164; Pakistan, 159; and West¬
ern society, 433. See also Bribery
Covert operations, and BCCI theft,
432. See also Intelligence agencies
and BCCI

Cowan, Christopher, 305
Cranston, Alan, 330
Credit and Commerce American Hold¬
ings N.V. (CCAH), 50, 51, 5in, 52,
56,338

Credit and Commerce American In¬
vestments B.V. (CCAI), 5in, 52, 56
Credit and Finance Corporation, 311
Crescent Holding Company, 51
Cromwell Hospital, 66, 77, 81, 230
Culbertson, Dooley, 3 54n
Culver, John C., 273-74
Curasao, BCCI in, 21 in
Currency transaction reports (CTRs),
218,257-58,259,274
Cutler, Lloyd, 331

Index

5°4 )

Dajani, Wafai, 139
Darwaish, Abdullah, 8, 42, 43, 51, 60-
62, 199, 342, 344, 388, 389, 390,

391,413,414-15,417

Darvvisch, Samir, 364
Dasuki, Ibrahim, 162
Dasuki, Sambo, 162
David-West, Tam, 161, 164
Davis, Polk 6c Wardwell, 299, 402,

4*5

Deak, Nicholas, 124
Deak 6c Company, 124
Deaver, Michael, 114
Debt crisis, Third World: and capital
flight, 166-67 ; in Peru, 214
DeConcini, Dennis, 27on
“Deep throats,” in BCCI investiga¬
tion, 251

Delvalle, Eric Arturo, 429n
Democratic party, 427-28
Democrats for the Eighties, 99
Destinos Transoceanicos Navigacion,
*5

Dettmer, Maurice, 287
DiBona, Charles J., 112
diGenova, Joseph, 430
Dillon, Read, 367, 367n
Din, Samir Najm al-, 328
Dingell, Debbie, 372
Dingell, John, 330, 371-72
Dinges, John, 225
Djibouti, BCCI in, 18
DLF Finance Inc., 70, 353-5411
Dobrich, Fulvio, 354n
Dodd, Christopher, 330
Doe, Samuel, 157
Dole, Robert, 371

Double jeopardy, 407, 407n, 408, 425
Dougherty, James E, II, 177-82
Drexel Burnham Lambert, 71, 72
Drogoul, Christopher, 139, 140, 383
Drucker, Peter, 184
Drug trade, 157; and BCCI money
laundering, 208, 210, 211, 217,
219, 228-29, 234; by Kalish, 209,
225; in Latin America, 216, 217;
by Noriega, 224-25, 235; in Paki¬
stan, 159-61; in Paraguay, 215
U.S. EFFORTS AGAINST, 231-35; and
Bush reticence on BCCI, 427; and
CIA reports, 382; ignored leads,
348-49; indictments (1991), 347-

48; Mazur undercover operation,
228-29, 232-34, 239, 240, 241-
44, 246-50, 251 (see also Opera¬
tion C-Chase); Noriega indictment,
235-36; Senate investigation, 236-
41, 242-43, 244-45. See also Legal
proceedings

Dubai, 5,9, 14, 24, 51, 86, 194
Dubon, Carlos, 178
Dukakis, Michael, 371
Duque, Alberto, 368, 368n
Durrani, Arif, 137, 138
“Dutch sandwich,” 5m
Dutton, Frederick G., 109, 116

Eagleburger, Lawrence S., 141, 142,
256, 366

Eddy, William, 101, i2on
Egypt: and Adham, 48-49, 119, 120,
121; and BCCI, 18; and Camp
David Accords, 121-22; Feisal Is¬
lamic Bank in, 204, 306, 316, 322,
424; shutdown victims in, 316; So¬
viets expelled from, 121; U.S. aid
to, 132; and Yemen conflict, 119
Eisenberg, David, 363
Eissa, Hazem, 214
El Gamal, Joseph, 175
Elley, Khusro, 76, 77, 340
Emerson, Steven, 112
England. See Britain
Equity capital of BCCI, 193-97, 290
Erck, Fredrick, 107
Ernst 6 c Young (Ernst 6 c Whinney),
105, 288, 395

Ershad, Hussain Mohammed, 156-
57, i68n

Ertz (Erickson), Kathy, 248
Escobar Gavfria, Pablo, 219, 348
Eurodollar market, 15
European Overseas Bank, 170
Euroscam, 173

FABNY. See First American Bank of
New York

Fafowora, Oladapo, 211
Fafowora, Olutende (“Steve”), 211,
220

Fahd (crown prince and king of Saudi
Arabia), 103, 108, 122, 397, 401
Fairfax Group, 168, i68n

Index

Faisal (king of Saudi Arabia), 38, 105,

119, 120

Farland, Joseph, 40, 126

Farrakhan, Louis, 115

Fear, Richard, 403

Federal Reserve: action against BCCI
from, 319, 321, 323; and Albright
as trustee, 397; BCCI clues ignored
by, 352-53; and BCCI crimes in
New York, 285; and BCCI-First
American relation, 278, 286-87,

291, 300-301; BCCI investigation
by, 259; and BCCI loans to First
American shareholders, 337; BCCI
money laundering found by, 219-
20; and Bin Mahfouz, 401-2; and
BNL scandal, 140, 383; and CIA
report on BCCI, 382, 429; Clifford
queried by, 342; Clifford quotes
officials of, 410; and College of Su¬
pervisors, 289n, 307; and Darwa-
ish case, 60-62, 417; defense of
conduct of, 3 54; and FGB take¬
over, 51-58, 75, 108; fine imposed
by, 353-54; and First American
financial condition, 326; and for¬
eign banks, 355; and liquidation
settlement, 393; and Moscow’s in¬
vestigation, 288; reticence of over
BCCI scandal, 427; Senate testi¬
mony by, 331

Federal Savings &: Loan Insurance
Corporation (FSLIC), 376

Feighan, Edward, 27on

Feisal Islamic Bank, 204, 306, 316,

322, 424

FGB. See Financial General Bank-
shares

FGB Holding Company, 6on

Fialka, John, 295

Financial General Bankshares (FGB)

(later First American Bankshares),

32, 39; and Lance, 32, 35, 40-41
TAKEOVER OF, 4O-43, 50-51, 60; as
Adham payoff, 122-23; an d
Aslam, 389-91, 412-16; and
Bench’s suspicions, 187; and Clif-
ford, 43, 46, 50, 51, 54-55, 60,

410 (see also Clifford, Clark M.);

Federal Reserve hearing on and ap¬
proval of, 51-58, 108; and Federal
Reserve performance, 352; law

( 505

brief on, 334n; lawsuit by FGB, 43,
4 6 ~47. 57. 194. 4M; lawsuit by
SEC, 43, 46; name changed, 60;
New York Board hearing on and
approval of, 58-59, 358; and
Siebert, 358; and Skadden Arps
role, 333-34, 334n; tender offer
for, 60, 61; and Zayed, 388-89.

See also First American Bank-
shares, Inc.

Fiores family, 25

First American Bank N.A., 112, 134
First American Bank of Georgia, 73.

See also National Bank of Georgia
First American Bank of Maryland, 74,
324

First American Bank of New York
(FABNY), 73, 76, 234, 285, 340,

^ 34L405

First American Bank of Virginia, 74,
2 4 5n, 324, 338, 341,343
First American Bankshares, Inc. (for¬
merly Financial General Bank-
shares), 60, 73; Adham in, 321; all-
American board for promised, 52,
55, 75; and Americas Coordinating
Committee, 340; Bank of Escambia
taken over by, 287; and Bin
Mahfouz family, 207, 398; Blum’s
source on, 239; and Clifford, 43,

46, 60, 73, 75, 98, hi (see also
Clifford, Clark M.); Clifford-Alt-
man stock deal in, 301-2, 302n,
336, 341, 352, 378, 405-6; and
COP-Andersons, 377; and Dingell,
372; and FABNY, 285; financial
troubles, of, 297-98; and Fulaij,
322; grand jury investigation of,
277; and Hakim, 137; Hart loan
from, 115; and ICIC certificates of
deposit, 325,341,405;

Katzenbach as chairman of, 326-
27, 327n; Khalil as shareholder in,
322; lawsuit against, 74, 245^

338, 341, 343; lawsuit by, 194;
loans to directors of, 339; McGee
story on, 298; and money launder¬
ing, 234, 234n; NBG bought by,
69-70. 73. 2.65-66, 284, 325, 341,
372, 406, 407, 408; and Noriega,
227; and Operation C-Chase, 246;
performance of, 324-25; as politi-

Index

506 )

First American Bankshares, Inc. (cont.)
cal tool, 108-10; post-shutdown
lawsuit against board of, 315; pro-
Arab tendencies in board members
of, 111-13; secrecy over ownership
of, 74-75, 340-41; trusteeship for,
396-97

AND BCCI, 75-77, 129 , 265-66,

269, 290-91,419; and Adham,
321-22; and Altman, 259; Aslam
on, 412-17; Awan on, 242, 243-
44, 254, 265; and BAII, 64; and
Bank of England notification, 353;
and Bin Mahfouz, 401; Blum’s sus¬
picions on, 284; and CIA role, 382,
429, 431; and Clifford-Altman in¬
dictments, 407; Clifford disclaimer
of, 3 31; Clifford’s quoting of Fed
officials on, 410; clues on, 340-41;
congressional hearings on, 333-40;
and federal investigation, 278; and
Federal Reserve, 286, 288, 301,
321, 352-53, 354; and Gurwin in¬
vestigations, 293-94, 295, 296; im¬
pact of scandals on, 325-26; im¬
pact of shutdown on, 324; and
liquidation fund, 393; and Manhat¬
tan D.A.’s investigation, 299; nega¬
tive influence, 325; as satellite, 72;
severance ordered, 359; and
Wall Street Journal article, 295,
296; Washington Times story on,
260

First American Corporation, 6on
First American Currency (FAC), 171-
72.

First Arabian Corporation, 106
First City Bancorp of Texas, 142
First Commerce Securities, 173-76
First International Bank of Houston,

365 .

First National Bank of Chicago, 33,

47, M 2

Fiske, Robert B., Jr., 299
Fitzgerald, William H. G., 40
Fitzwater, Marlin, 370
Flanigan, Peter M., 40, 367
Fleming, Mourad, 394
Flowers, Christopher, 297
Foley, Tom, 330
Ford, Gerald, 83
Forecast, D., 380

Foreign Corrupt Practices Act, 3611
Foreign exchange abuses by BCCI,
167-69; in India and Kenya, 241
Fox, Kerry, 146-47, 150, 151
France, 214, 289m 311
Franklin National, 1 i3n
Fraud and misconduct by BCCI, 184,
l 97, 198 , 39 I_ 9 2 > 4 2 °, 4 2 i" 2 3;
Aslam’s account of, 412; and audi¬
tors, 205-6, 288-89, 356, 433 (see
also Price Waterhouse); in Banco
Mercantil purchase, 212; and Bin
Mahfouz, 206-8, 398-401; Blum
on, 284; challenge in cover-up of,
208; and possible role of CIA, 432;
control-system breakdown respon¬
sible for, 432-34; denouement of,
423; and equity capital, 193-97;
and Gokal family’s Gulf Group,
183-84, 185-86, 188-89, x 9 2 ; ' n_
stigators of, 423-24; Kerry Com¬
mittee information on, 250; in loan
cover-up, 192; Morgenthau on,
320-21; and move to Abu Dhabi,
2.93, 303; mystery remaining in,
435; in Naqvi files, 303-4; and
Naqvi on “moral values,” 278;
New York indictment on, 408; as
Ponzi scheme, 198, 205; and regu¬
lators, 186-87, 252-53, 351-61,
433 (see also Regulators, bank); re¬
ports on (Price Waterhouse), 267,
289-91, 296, 299-300, 305-6,
309, 327, 398-99; and restructur¬
ing, 303; rescue operation to allevi¬
ate, 291-92; and shutdown, 307,
309, 317; speculation by treasury
department, 199-204, 205; trans¬
fers and loans to bank officials,
197-98; unaccounted-for losses
from, 426-27; unlicensed retail ac¬
tivity in U.S., 354; in use of nomin¬
ees, 197

Freeman, Charles W., Jr., 401
Fujeirah, 5, 9, 51
Fujimori, Alberto, 32m
Fulaij, Faisal Saud al-, 18, 57, 195-96,
196, 207, 322-23; and Altman on
BCCI, 344; in Aslam’s account,

414; and Attock Oil, 66; and Boe¬
ing, 49; and CCAH, 51; in Federal
Reserve order, 321; and FGB, 41,

43, 47, 6i, 388, 412-13; in indict¬
ments, 320, 407, 408; and KIFCO,
8on; and Pharaon, 69; press atten¬
tion to, 54

Fuller, Craig L., 257, 429
Fuqua, J. B., 354n
Furmark, Roy, 129
Futures market, BCCI in, 199-204;
and Senate investigation, 240

Gabon, BCCI in, 18
Gagne, Clement R. (“Kim”), III, 258
Gailey, Phil, 45
Gandhi, Indira, 89, 111
Gandhi, Rajiv, 169
Garcia Diez, Juan Antonio, 95
Garcia Perez, Alan, 213-15,321,32m
Gasch, Oliver, 57
Gates, Robert, 381
Gates, William, 286
Gauhar, Altaf, 66, 88, 91, 92, 93, 95,
117

Gauhar, Humayun, 92, 92-93, 95
Gauhar, Raana, 92
Gavin, James M., 60, 1 n, 338
Geldof, Bob, 89
Genzman, Robert W., 250
George, Eddie, 300, 306-7
George, Peter E., 268
Gephardt, Richard A., 371
Gerth, Jeff, 258
Ghana, BCCI in, 18
Ghorbanifar, Manucher, 135-36
Giannini, A. P., 11
Gibson, Dunn Sc Crutcher, 106
Gillard, Michael, 357
Giuliani, Rudolph, 285
Glasse, Wilfredo, 347n
Glenn, John, 113
Global Chemical Systems, 148
Global 2000, 84, 108,156, 276, 422
Goedschalk, Henk, 165
Gohary, Sayed E 1 -. See Jawhary, Sayed
Gokal family, 28, 29, 35, 138, 142,
175-76, 183-84, 185-86, 192,

200, 200-201, 208, 306, 324
members of: Abbas, 35, 123, 185,

201, 384; Flussein, 123; Murtaza,
123,185; Mustapha, 123, 138,185

Golden Crescent, 159, 210
Golden Triangle, 159, 210
Goldman Sachs, 297, 297^ 428

Gonzalez, Henry, 141, 328, 332., 337,
338,352,381,382-84
Gonzalez Fraga, Javier, 216
Good, Patrick Anthony, 220
Gore, Al, Jr., 371
Goulden, Joseph C., 45
Graham, Bob, 96, 373
Graham, Katharine, 331
Grambling, John, 285
Gray, Robert Keith, 112, 112n, 114,
116, 128, 152-53,257,2570,339,
430

Great Britain. See Britain

Green, Joyce Hens, 393, 397, 425-26

Greenspan, Alan, 359

Griffiths, Brian, 87

Gritti, Carlo, 72, 72n

Guardian Third World Review, 91

Guatemala, 96, 165, 179

Gulf East Pte. Ltd., 175

Gulf Group, 28, 29, 35, 123, 138,

175, 183-84, 189, 197, 306, 324
“Gulf group” (BCCI faction), 26, 229,
230

Gulf Investment Real Estate Com¬
pany, 51

Gurwin, Larry, 293-94
Guyton, Robert P., 67

Habib Bank, 3-4, 18, 184
Haig, Alexander, 86
Hakim, Albert, 136, 255
Hammer, Armand, 40, 42, 142
Hammoud, Kassem, 380
Hammoud, Mohammed Mahmoud,
196, 302, 370, 377-81,424
Hammoud, Violette, 380
Hamr, Abdel-Malik al-, 317
Haq, Aminul, 157
Haq, Fazle, 160, 161
Haq, Mahbubul, 82
Harken Energy Corporation, 369-70
Harpon Trading, 192
Harr, Karl G., Jr., 128
Harriman, Averell, 99
Harriman, Pamela, 99, 330, 372
Harris, Gerardo, 181
Harris, Richard, 403
Hart, Gary, 115, 266
Hartmann, Alfred, 384
Hasan, Khalid, 92
Hasan, Sharaful, 207

Index

508 )

Hashemi, Cyrus, 129
Hassan, Sibte, 247, 249, 262, 263, 277
Hassan II (king of Morocco), 15 2
Hatch, Orrin, 100, 274-75, 373~79,
430-31

Heflin, Howell T., 27on
Heimann, John, 35
Helliwell, Paul, 124-25, i25n
Helms, Jesse, 232, 342
Helms, Pearsall, i27n
Helms, Richard, 126-28, 365, 432
Helmy, Abol Fazl, 256, 340
Henkel, Oliver, 115
Hercules Inc., 72
Hersh, Seymour, 235
Hershman, Mike, 168-69
Hilal Foundation, 25
Hill and Knowlton, 112, 112n, 116,
128,256-58,315,331,339,375,
428,429,430
Hillbery, John, 252-53, 256
Hodges, William Terrell, 268-69, 2.70,
* 77 , 349

Hogan, Frank S., 282
Holbrooke, Richard, 330
Holland &C Knight, 254-55, 268, 276
Holley, R. Eugene, 36, 36n
Hong Kong, 18, 64, 210, 289n, 312
Hong Kong Deposit and Guaranty'
Company Limited, 129
Hong Kong Metropolitan Bank, 18
Hope, Bob, and Symington, 50
Hostler, Charles, 370, 378
Hourani, Monzer, 375-77, 379
Howard, Charles, 147
Howard, Ian, 247, 249, 262, 277
Howrey &; Simon, 346
Hoyer, Steny, 330
Hughes, William, 27011
Human rights abuses, 49
Hunt, Al, 330

Hunt, Herbert and Bunker, 107
Husain, Shahid, 98
Hussain, Abida, 35 1
Hussain, Syed Aftab, 229, 234, 247,
249, 262, 277

Hussein, Saddam, 139-41, 157, 158,

383

Husseini, Arif, 161

Ibn Saud, Abdel-Aziz, 102-3, io 4
al-Ibrahim family, 167

ICIC. See International Credit 6c In¬
vestment Co. (Overseas) Ltd.

ICIC Foundation, 231
ICIC Group, 188, 190, 195, 206
ICIC Holdings Limited, 190
ICIC Overseas Ltd., 186, 190, 196
ICIC Staff Benefit Fund. See Staff
benefit fund

Imam, Imran, 198, 207, 403, 405-6
Independence Bank, 68-69, 72, 149,
265, 293, 297, 319, 348, 351, 354,
393, 422; and Mattingly testimony,
353; and Pharaon, 68-69, 149,

297, 3 19, 353, 42.2.; and Shoaib,

69, 213n, 384
India, 89, 168, 143, 241
Indonesia, 110
Innocence by association, 85
Institutional Investor ; Abedi inter¬
viewed by, 167, 419
Institut Monetaire Luxembourgeois
(IML), 202, 289, 305, 308, 355,

356

Intelligence agencies and BCCI: and as¬
sociations with shady banks, 124-
26; and BCCI shareholders, 123-
24; and Capcom money transfers,
204; and First American takeover,
126-29; and 1979 Mideast opera¬
tions, 132; and stolen money, 153.
See also CIA

International Bank, 39-40, 41, 125
International Bank for Reconstruction
and Development (World Bank),
97-98

International Credit 6c Investment Co.
(Overseas) Ltd. (ICIC), 27, 125-
27, 190, 194, 304; and BCCI loss
cover-up, 203; and Bin Mahfouz
family, 400; First American pur¬
chase of CDs from, 325, 341,405;
and Kazmi, 66; and Mazrui, 387;
misappropriation through, 197;
shutdown of, 311; stock manipula¬
tion through, 195

International Monetary Fund (IMF),
164

International Rice Research Institute,
88-89

International Travel Corporation
(ITC), 66, 82, 124, 293
Interedec Inc., 67

Index

Inter-Services Intelligence Agency
(ISI), 124, 133, 159
Iqbal, Zafar, 24, 26, 229, 231, 253,
292, 300, 303, 304, 306, 380, 385,
399,416

Iran: Abu Dhabi’s fear of, 9; and arms
trade, 178; and BCCI, 14, 126,
137-38, 158, 194; shah’s fall in,

J 3 1_ 3 2 i 158

Iran-contra affair, 129, 134-37;
Casey’s involvement in, 133n; and
CIA resistance to inquiry, 431; and
Durrani, 138; and Khashoggi, 37;
and North testimony on Casey,

154; Scowcroft in investigation of,
142

Iran-Iraq War, 135, 158, 383
Iraq, 139-41. i 57 > 158-59
Irvani, Bahman, 128
Irvani, Mohammed Rahim Motaghi,
67, 127, 365

Ishaq Khan, Ghulam, 82, 144, 160-61

Islam, Shi’ite and Sunni, 3

Islamic banks, 197, 204

Israel, 103, 132. See also Zionism

Italfinance, 140

Ivory Coast, 18, 408

Jaans, Pierre, 202, 307, 308, 309-10,
35G 398

Jabir, al-Ahmad al-Sabah, Prince, 106
Jackowski, Mark V., 247, 261, 262-
63, 264, 268, 269, 277,357
Jackson, Jesse, 115-17, 257, 428
Jacobs, Sir Piers, 312
Jamaica, 165, 168, 21m, 218, 2i8n
Jamil, Tariq, 67-68, 86
Janis, Schuelke Sc Wechsler, 254
Japan, BCCI in, 19, 311
Japan Center for Information and Cul¬
tural Affairs (JCIC), 152
Jawhary, Sayed, 52, 54, 147, 150,

196, 320, 321, 322, 404, 406
Jensen, Brian, 113
Jinnah, Mohammed Ali, 184
Johnson, Lyndon, and Clifford, 44
Jonathan Livingston Seagull, 20
Jones, Charles, 69, 372
Jones, Day, Reavis Sc Pogue, 339
Jordan, 166, 178, 179
Jungers, Frank, 121
Justice Department: aggressive policy

( 509

claimed by, 350; on BCCI plea bar¬
gain, 271, 277; BCCI spared by,
277, 279, 286; and Clifford-AIt-
man indictments, 406-7, 408-9;
and Clifford-Altman trials, 425;
criticisms of, 347-48, 349, 3 50;
and Helms settlement, 127; in¬
dictments announced by, 347,
350-51; and Kerry Committee
probe, 239; letters in aid of BCCI
from, 270-71, 358; and Man¬
hattan D.A.’s probe, 287-88, 404-
5; money-laundering referral to,
220; and Noriega, 250, 271; and
Operation C-Chase halt, 246;
reticence over BCCI scandal, 427;
and Senate Judiciary Commit-
tee, 373; and Tampa plea bar
gain, 270 ; and white-collar crime,
361

Kabbani, Issan, 129
Kahlon, Haroon, 398, 400-401, 402
Kalish, Steven Michael, 209, 225-26,
235, 236, 247, 267,372
Kasper-Ansermet, Laurent, 173
Katzenbach, Nicholas deB., 326-327,
32 7 n

Kazmi, Hasan Mahmood, 66, 191,
196,198

Keating, Charles, 328, 373, 384

Kehoe, Greg, 349

Kellner, Leon, 236

Kelly, Brian, 294

Kelly, J. B., 10

Kemp, Jack, 367

Kemper, Wallace C., Jr., 170-71

Kennedy, Edward M., 237, 330

Kennedy, John F., and Clifford, 44

Kennedy, Joseph, 334

Kenya, 18, 168, 241

Kerry, John F., 237, 240, 250, 273,

381; and Abu Dhabi noncoopera¬
tion, 386; and BCCI documents,
274; on BCCI as Noriega’s bank,
251; on BCCI plea bargain, 269-
70; Blum reported fired by, 296;
Blum’s testimony to, 361; and Cen-
Trust, 71, 273n; on CIA report,

382; on Clifford-Altman hearings,
339-40; contributions to, 272-73,
434; and Culver request, 274; in-

Index

5 10 )

Kerry, John F. (cont.)

vestigators for, 297n, 375, 379,
388, 413n, 431; and Morgenthau,
283; and NBC report, 264; and
Pell, 372; and Rogers, 363-64
Kerry Committee, 237, 238, 254;
Awan testimony to, 274, 275; and
BCCI misdeeds, 250, 434; Clifford-
Altman hearings of, 339-40, 342,
345; and Clifford containment ef¬
forts, 260, 272; hearings resumed
by, 328; Lehtinen’s testimony to,
350; and Morgenthau, 283; and
Noriega, 242-43, 244-45; and Op¬
eration C-Chase, 239; and
Regardie's article, 296
Khaled (king of Saudi Arabia), 122
Khalifa, Prince bin Zaved, 24, 25,

194, 292, 305, 386, 387, 388, 389,
399,417

Khalifa bin-Salman al-Khalifa, Sheikh,
370

Khalil, Abdul-Raouf, 322; and BCCI
Cayman branch, 200; BCCI money
to, 204; as BCCI shareholder, 194;
and BCCI treasury department
dealings, 200; as alleged benefici¬
ary of diversion, 427; and Bin
Mahfouz, 401; and cable television
executives, 151; and Capcom, 149,
1 5°, x 53 > 2 ° 5 ; an d CCAH, 51; and
CIA, 130, 150, 429, 43 1, 432; in
Fed order, 321, 323; and FGB, 54;
loans to, 290
Khan, A. H., 7, 10
Khan, Abdul Qadar, 143-44
Khan, Afzal Said, 79
Khan, Asghar, 221, 22m
Khan, Ghulam Ishaq, 82, 144, 160-61
Khan, Jamshid, 191
Khan, Mohammad Ayub, 88
Khan, Omar, 144
Khan, Rahimuddin, 82
Khan, Sultan Mohammed, 82, 95, 141
Khan, Yahya, 141
Khan, Yunus, 82

Khashoggi, Adnan, 37, 84, 105, 112,

* 35 - 37 , i 3 8 » 1 5 ^ 2 * 4 , 3 ^ 4 , 377
Khomeini, Ayatollah, 108, 131
Khun Sa, 210

Kidder Peabody 6c Company, 352
Kingshott, Leonard, 305

Kinnock, Neil, 318

Kinsley, Michael, 332

Kiran, Muneer, 136

Kissinger, Henry, 13, 120-21, 141,

2 5 5-5 6

Kissinger Associates, 141-42, 255,

256, 366

Kleptocracy, in the Third World, 157
Knight, Jerry, 61
Kochan, Nicholas, 387
Koers, Jan, 174
Kott, Irving, 174, 175
Kott, Michael, 174
Kovach, Bill, 85
Kovin, John R., 272
Kraus, Douglas M., 48
Kroll, Jules, 159
Kroll Associates, 158-59
Kutak, Rock 6c Huie, 359
Kuwait, 59, 132, 158-59
Kuwait Airways, 49
Kuwait International Finance Com¬
pany (KIFCO), 18, 47, 57, 80, 322-
2 3

Lake, James, 386, 429
Lamarche, Yves, 65, 297
Lamont, Norman, 318
Lance, LaBelle David, 31
Lance, T. Bertram (“Bert”), 30, 31-
32; and Abedi’s efforts for BCCI,

37, 83, 412; and Altman on First
American, 294; in Aslam’s account,
414; and Carter, 3 1, 32-34, 36, 39,
83; and Clifford-Altman relation¬
ship with BCCI, 342-43; and FGB
as seller of NBG, 3 2, 3 5; FGB
stockholder on, 53; and FGB (First
American) takeover, 39, 40-43, 46-
47, 55? 57? *°9; a nd First Ameri¬
can stock purchases, 90; and First
National Bank of Chicago, 33, 47,
142; and Holley, 36; and Jackson,

1 16-17, 257; and Lancegate scan¬
dal, 33-34, 34 n , 45, 98, 335; and
National Bank of Georgia, 32, 33,
34, 37 , 39 , 67, 107-8; New York
subpoena to, 298; Pakistan visit of,
109, 413; Pharaon buys NBG stock
of, 39; rumor of as BCCI head, 230
Latin America, BCCI in, 64, 211-12.
See also individual countries

Index

Lautenberg, Frank, 330
Lavoro Bank A.G., 384
Laxalt, Paul, 273, 366, 429
Laxalt, Washington, Perito Dubuc,
2 54

Lebanon, BCCI in, 18
Lee Kuan Yew, 96

Legal proceedings (U.S.): indictments
of BCCI officers (1991), 347-48,
350-51; and liquidation proceed¬
ings, 392-93; and South magazine,
93

tampa federal cases: and BCCI
attempt to show reform, 267;

BCCI containment effort against,
252-62, 433; BCCI disadvantage
in, 267; and BCCI vs. individual re¬
sponsibility, 262-63; defense strat¬
egy in, 263; documents discovered,
251, 266; and election-year poli¬
tics, 246-47, 250; and First Ameri-
can-NBG-Independence Bank,
265-66, 269; indictments and ar¬
rests, 247-50, 266-67, 274; legal
expenses in, 267; and Lodhi, 264-
65; media interest in, 251, 259-62,
263-64; and Noriega documents,
263-64; and Noriega prosecution,
271; plea bargain attempted, 268;
plea bargain made, 269-70, 272,
277, 278, 349-50. 379; and politi¬
cal connections, 271-76; potential
of, 252; pretrial release of bankers,
262; trial anticipated, 268-69; tri¬
als of individual bankers, 277-78

BY MANHATTAN D.A. (AGAINST

bcci): Adham plea negotiation,
404; and Bank of England action
against BCCI, 306; Blum’s report,
284-85; and Federal Reserve, 301;
indictment of BCCI and founders,
319-21, 329, 407-8; indictment of
Bin Mahfouz, 400-401; as leading
effort, 319 , 323 , 347 , 400 ; liquida¬
tion fine, 393 ; Moscow’s investiga¬
tion, 285 , 286 , 287 - 88 , 293 , 298 -
300

AGAINST CLIFFORD AND ALTMAN,
404-5; evidence supporting, 405-
6, 411-17; federal indictments,
406-7, 408-9; New York indict¬
ments, 406, 407-9; responses by

( 5 11

Clifford and Altman, 408-11;
trial(s), 425-26
FEDERAL RESERVE ACTIONS: delay

in, 353; fines, 353~54, 401-2; in-
vestigation, 301; orders, 319, 321,
323; referrals to Justice Depart¬
ment, 301

NEGLECT AND OBSTRUCTION: and

CIA allies, 430 ; and CIA secrecy,
286 ; Federal Reserve indifference,
286 - 87 , 352 , 353 ; and Hatch
speech defending BCCI, 374 - 75 ,
379 ; and Justice Department letters
to regulators, 270 - 71 , 358 ; leads ig¬
nored, 269 , 277 , 348 , 350 , 352 ; Op¬
eration C-Chase halted, 246 - 47 ,
250 , 286 , 348 ; and political corrup¬
tion, 427 ; Schumer report on, 348 -
50 ; and Tampa plea bargain, 269 ,
279 ; von Raab’s removal, 368 . See
also Congressional investigations
into BCCI; Shutdown of BCCI
Lehrmann, Richard, 180
Lehtinen, Dexter, 350
Leigh-Pemberton, Robin, 317, 318,
356 . 357 . 36°

Lending by BCCI: cover-up of, 189-
93; to Gulf Cap group, 28, 29,
183-84, 185-86, 189, 192; to in¬
siders, 29, 48, 186, 188, 193; to
Lance, 47; Price Waterhouse report
on, 289-90, 29on; questionable
practices in, 188-89; to senior
BCCI officials, 197-98; unsecured
loans to Arab customers, 35; to
Zayed, 387

Lesher, J. Griffin, 272, 295
Lesher, Richard, 112
Letelier, Orlando, 255, 430
Levine, Mel, 27on
Levine, Theodore, 57n
Lewis, Gerald, 71, yin, 270, 278, 358
Libel suits: as BCCI defense, 260-61,
294; Mazrui threatens, 387
Liberia, 18, 157, 168
Liberty Media Corporation, 146
Libya, 115-16, 143
Liechtenstein, 25, 48, 143, 427
Lifschultz, Lawrence, 92, 160
Lilienthal, David, 44
Liman, Arthur, 135
Linn, James, 323

Index

512. >

Linowes, R. Robert, 40
Linowitz, Sol, 331
Lippo Group, 366
Llorente, Rodrigo, 2.12
Lobbyists, for BCCI, 361
Lockheed bribery scandal, and
Khashoggi, 37, 105
Lodhi, Amer, 264-65, 298
Lozano, Alvaro, 22-23
Lutyens, Sir Edwin, 316
Luxembourg: BAII held in, 65; BCCI
in, 139, 185, 305; BCCI holding
company in, 17, 193, 248, 288,
309; BCCI incorporated in, 2, 12,
94, 165; and BCCI liquidation,
393, 395; and BCCI shutdown,
307-8, 311; Canadian courts de¬
nied evidence from, 220; and Col¬
lege of Supervisors, 289; IML in,
202; Noriega’s BCCI account in,
236, 244,263

Me Amis, Edward, 47
Maccido, Muhammadu, 162
McCloy, Francis E., 130
McCoy, Alfred, 160
McFadden Act, 32, 34
McFarlane, Robert (“Bud”), 134
McGee, Jim, 298, 300, 301
McKean, David, 264
Macleod, Donald, 3 14
Macleod, George, 314
McQueeney, Tom, 300-301
McTaggart, Timothy, 373
Magness, Bob, 146, 147, 148, 149,

151

Mahmood Reza Pahlavi, Prince, 126
Mahmudabad, rajah of, 3, 4
Main Bank, Houston, 107, 397
Mainland Savings, 376-77
Major, John, 318
Maksoud, Clovis, 116
Maktoum, Mohammed bin Rashid al-
’ 51

Maktoum, Rashid bin Said al-, 8, 24,
5 i

Malone, John, 151-52
Mandela, Nelson and Winnie, 89
Mankiewicz, Frank, 116, 257, 272,
27211, 273, 295, 296, 302n, 331
Manley, Michael, 88
Mannion, Robert E., 54, 56, 359

Manufacturers Hanover Trust Com¬
pany, 33, 35 4 n

Maram Trading Company, 200
Marcos, Ferdinand, 157
Marcotrade S.A., 175, 192
Marshall, George, 110
Mascarenhas, Anthony, 91, 143
Mashriq Holding Company, 51
Massot, Richard, 315-16
Masud, Javangher, 360
Mathias, Charles McC., in, 112, 326
Mattingly, J. Virgil, Jr., 352-53, 354,
429

Mauritania, 166
Mauritius, 18, 168
Maxwell, Robert, 260
Mazrui, Ghanem Faris al-, 129, 304-
5,307,308-9,3090,317,387
Mazur (Musella), Robert, 228-29,
* 33 - 34 , Mi- 44 , ^ 45 - 46 , 248-49,
434; Awan disclosures to, 242-44,
265, 286; and closing of investiga¬
tion, 250, 286, 348; and Escobar,
348; and First American, 352; re¬
signs from Customs Service, 349
Media: BCCI exposes in, 293-95,

296; and BCCI shutdown, 327-28;
and Capcom, 147; First American
investigated in, 298, 300; and legal
proceedings against BCCI, 251,
259-62, 263-64; and Saudi Ara¬
bia, 145-46; Turner’s outlets, 145,
I5I-53

Meier, Kurt, 173
Melli Industrial Group, 67, 127
Mellon Bank, BCCI disdained by, 238-
39

Mercantile and Marine (Texas) Inc.,
175

Mercantile Bank and Trust Ltd., 124-
25, 125 n

Metzenbaum, Howard, 270, 27on,

330

Metzger, Eugene J., 40, 41, 4 m, 43,

48, 2970

Middendorf, J. William, II, 40, 42,

43 n , 47, 126, 128

Middle Flast: and banking, 28; BCCI
in, 18; capital flight from, 158; and
imperial powers, 4-5; media cover¬
age of, 145. See also Third World;
individual countries

Index

Midfa, Hamad al-, 415
Mieno, Yasushi, 311
Milbank, Jeremiah, 40
Milbank, Tweed, Hadley Sc McCloy,
2 95 > 3 59

Milberg Weiss Bershad Specthrie Sc
Lerach, 315
Milken, Michael, 72
Miller, Gil, 201
Miller, Morris J., 171
Mirror trades, 203
Misconduct by BCCI. See Fraud and
misconduct by BCCI
Mitchell, George, 273
MMRT Associates, 18211
Moe, Richard, 331
Mohammad Reza Pahlavi (shah of
Iran), 13,131

Mohammed, Prince (son of King
Fahd), 145

Mohammed, Prince (son of King Fai¬
sal), 38

Mohammed bin Zayed, Sheikh, 23,

42, 61, 388, 390, 391,413,414,
4i5

Mohiuddin, Ghulam, 316
Moncada, Gerardo (“Don Chepe”),
347

Mondale, Walter, 115, 115 n
Money laundering by BCCI, 169-70;
and Bank of England’s actions,

357; BCCI’s benefit from, 263;

Blum on tapes of, 262; and Bush’s
reticence over BCCI, 427; for
Capcom stock deal, 149; in Can¬
ada, 220; and CIA reports, 382; de¬
nial of, 252-53; and First Ameri¬
can, 234, 234n, 343; in Hong
Kong, 21 o; in Latin America, 211,
217, 219, 226; Mascarenhas’s alle¬
gation of, 91; in Miami, 218-19,
219-20; and New York jurisdic¬
tion, 285; for Nigeria, 211; for Pan¬
ama drug dealers, 209-10; and
“special audit,” 267; and Suriname
loan, 165; in UAE, 210

U.S. GOVERNMENT EFFORTS AGAINST:

higher-management culpability al¬
leged, 357; indictments, 248, 266-
67; and individual bankers, 277-
78; investigations of blunted,
219-20; leads ignored, 348-49;

( 513

media attention to, 251; opportuni¬
ties neglected, 277; Senate investi¬
gation, 239-41; undercover opera¬
tions, 219, 228-29, 232, 233-34,
245-46, 250, 251-52. See also
Drug trade; Legal proceedings
Moon, Sun Myung, 21, 260
Mora, Gonzalo, Jr., 233, 248-49
Morgenthau, Henry, Jr., 280-81
Morgenthau, Henry, III, 282
Morgenthau, Robert M., 280, 281-
83, 287, 293, 298, 434,435; and
Bin Mahfouz, 397, 399-401; and
Blum, 283-85; and bribery evi¬
dence, 360; and Clifford-Altman in¬
dictments, 346, 405, 406, 407; on
extent of BCCI fraud, 421; and Fed¬
eral Reserve action, 353; and First
American trustee, 396-97; indict¬
ments by, 319-21, 347, 407-8; and
Moscow, 285-86 (see also Mos¬
cow, John W.); in Patman hearings,
33 2

Morley, Charles, 259
Morocco, 18, 408
Morris, Arthur, 39
Morris Plan banks, 39
Mosaddeq, Mohammad, 124
Mosbacher, Georgette, 367
Mosbacher, Robert, 367
Moscow, John W, 284, 285-86, 287-
88, 293, 298-300, 400, 425
Moss, Sarah, 404
Mueller, Robert S., Ill, 347, 407
Mufti, Majid, 82
Mugabe, Robert, 93-94
Muheim, Franz, 65
Mulholland, Douglas P., 382, 429
Mullen, Francis (“Bud”), 232
Mura International, 179
Murari, Krishen, 168
Musella, Robert. See Mazur, Robert
Muslims, and banking, 28

Nahyan, Shakhbut bin Sultan al-, 5, 6-
7

Nahyan, Zayed bin Sultan al-. See
Zayed bin Sultan al-Nahyan,

Sheikh

Naif bin Abdul Aziz al-Saud, Prince,
194

Index

5 r 4 )

Naomi, Humaid bin Rashid al-, 51,
196, 388

Naqvi, Arjmand, 204
Naqvi, Kazem, 175
Naqvi, Swaleh, 20-21; and Abedi, 11,
183; at Abu Dhabi meeting, 386;
and Akbar, 66, 147; arrest of in
Abu Dhabi, 385; and Aslam on
FGB takeover, 390, 414, 416; and
BCCI containment effort, 258; as
BCCI head, 230, 231, 291, 303;
bribery by, 360; Carter in Nigeria
with, 276; and destruction of docu¬
ments, 244; and FABNY, 340; Fed
bars from U.S. banking, 319; and
First American Bankshares, 405;
on Gokal loans, 186; and Hart
meeting, 115; and Hatch, 375,

376, 379; Helmy memo to, 256;
and ICIC, 325; and incriminating
documents move, 303; indictments
of, 320, 347, 351, 407, 408; and
Iqbal, 399; and Jackson, 116-17;
loan to, 197-98; at management
conferences, 22, 23; and Mazrui,
387; and Mazur’s investigation,

246, 348; and Kazem Naqvi, 175;
and nominee loans, 196; and
Noriega accounts, 236; in Price Wa¬
terhouse report, 306; resignation
of, 304; as shareholder, 194; on
stockholder borrowing, 291; stock
manipulation by, 195; summary of
losses given to, 203; on Tampa plea
bargain, 278; task force set up by,
289, 29on; as “technocrats” leader,
26, 229, 231, 253, 292; and Third
World Foundation, 88; and trea¬
sury department dealings, 200-
202; and Zayed, 329, 387
Naqvi files, 303-4
Nason, Jeff, 130
Nasser, Gamal Abdel, 119
Natelli, Tony, 113-14
National Bank of Georgia (NBG), 32,
33, 34, 37, 67-68; and Americas
Coordinating Committee, 340;
Awan on, 242, 265-66; and Carl¬
son, 127-28, 255; First American’s
purchase of, 69-70, 73, 265-66,
284, 325, 341, 372, 406, 407, 408;
and Gurwin’s investigation, 293;

and OCC study of BCCI, 187; and
Operation C-Chase, 246; and Pha-
raon, 38-39, 67, 69-70, 83, 107-
8, 187, 319, 341; renaming of, 73;
as troubled, 424

and bcci: and Altman’s understand¬
ing, 405; regulators oblivious of,
352, 353; as satellite, 72, 77
National Bank of Oman, 18, 30, 163,
200, 213

National Bank of Washington (NBW),
113, 115, 366-67

National Chemical Industries (Saudi
Arabia), 120

National Commercial Bank (NCB),
Saudi Arabia, 206, 207, 292, 306,

397 , 398 , 399 , 400,402

National Security Council (NSC), 133
National Student Marketing Corpora¬
tion (NSMC), 114
National Westminster Bank, 360-61
Nawabi, Arshad, 385
Nawaf bin Abdul Aziz al-Saud, Prince,
109

Nazerali, Altaf, 174-76, 176
NCNB Corp. (now NationsBank), 40,
69-70, 7011, 297, 29711
Nelson, Jack, 330
Newman, Gustave H., 42611
Nicaragua, 96, 132, 179, 430
Nicholls, Sir Donald, 392
Nidal, Abu, 101, 327-28
Nigeria: BCCI in, 64, 162-65, 2I °,

211; BCCI bribes in, 408; BCCI de¬
posits from, 165; corruption in,
161-62, 164, 166

Nixon, Richard, 78, 105, 231, 282,

2.84, 33 2

Noriega, Felicidad, 223
Noriega, Manuel Antonio, 157, 209,
221, 222-27, 2 35; an d Awan, 225,
239, 245, 254, 274, 275, 277; cap¬
ture of, 271; and Delvalle, 429^ in¬
dictment of, 235-36; Kalish infor¬
mation on, 235; and Senate
investigation, 237, 242-43, 246;
and U.S. presidents, 231
and bcci, 222-24, 226-27, 263-64;
and Altman on First American,

343; and arrest of money launder-
ers, 250; and BCCI plea bargain,
271; and Blum investigation, 239;

Index

documents destroyed, 144-45; an d
Hatch defense, 174-75; and Kerry
Committee, 137, 251,183; and
Regardws story, 194
North, Oliver, 134, 154,135, 318
North Carolina National Bank. See
NCNB

Northrop (arms manufacturer), 118
Northwest Investment Corporation,

127

North Yemen, BCCI in, 18
Notman, Donald D., 50
Novak, Robert, 73, 115
Nuclear weapons, 143-44, 178,422
Nugan Hand, 124,125
Nunn, Sam, 330, 372
Nyerere, Julius, 88, 89

Oasis banks, 305, 308
Occidental Petroleum, 142
Ohrenstein, Manfred, 58-59
Oil shock(s): and Nigerian corruption,

161; of 1973, 9, 13-14, 105, 157;
of 1 979 .158
Olayan, Suleiman, 106
Olmsted, George, 35-36, 39, 125,

126, 128, 367

Oman, National Bank of, 18, 30, 163,

200, 213

Operation C-Chase, 232-34, 239,

240, 241-44, 246-50, 251, 271,

2 74> 33 2 ? 343, 347, 349, 368, 382
Operation Pisces, 219
Organization of Petroleum Exporting
Countries (OPEC), 13,105
O’Sullivan, Robert, 300
Otano, Jose Antonio, 177,180
Othman, Talat, 370

Pakistan: and Abedi, 4, 421, 433;

Abedi and Carter visit, 85; and
Bangladesh, 156; and banking, 28,
184-85; BCC Foundation in, 82,

84; BCCI aid to, 80-81, 143-44; as
BCCI base, 18, 94; BCCI bribes in,

408; BCCI employees from, 191,

218; BCCI managers from, 169;
and BCCI shutdown, 329; under
Bhutto, 79-80; corruption in, 159;
Cromwell Hospital doctors from,

66; drug trade in, 159-61; estab¬
lishment of, 3; former regulators

( 515

hired in, 359-60; and Gulf nations,
100-101; and Kissinger in China,

141; Lance visits, 109, 413; and nu¬
clear weapons, 143-44; and
Shoaib, 384-85; and Time on
BCCI, 328; and UAE, 10; and
United Bank, 1, 2; and U.S., 131-
32; and Zayed, 10; under Zia-ul-
Haq, 80-83, J 59
Palestine Liberation Organization
(PLO), 49, 59n, 85, 115
Panama, 220-26, 234; cash flown to,
218; drug trade in, 209-10, 219; as
money-laundering center, 149; and
Noriega-BCCI connection, 157;

U.S. invasion of, 271
Paraguay, 165, 213, 215-16
Parsky, Gerald, 106
Parvez, Hassan, 273n
Patman, Wright, 332
Patrikis, Ernest, 301, 307
Patterson, Robert, 281
Patton, Boggs &C Blow, 273, 366, 387,
412, 428, 42811

Paul, David L., 71, 72, 86, 266, 273^

2 96 , 358 , 373-74
Peat Marwick Mitchell, 113
Peiris, Denzil, 92

Pell, Claiborne, 240, 273, 330, 372
Penny stocks, 172, 173
Percy, Charles, 33, 34, 116
Pereira, Jorge, 40
Perez de Cuellar, Javier, 89
Peron, Juan Domingo, 215
Peru, 165, 166, 213-15, 320-21, 360,
408

Pervez, Arshad, 144
Petrodollars, 25, 50, 54, 77, 101, 167,
420

Petrusse Securities International, 175
Pharaon, Ghaith Rashad, 11, 37-39;
and Abedi, 11,38, 67; and Ameen,
370; and American Southern Com¬
panies, 70, 3 53~54n; and Attock
Oil, 66; and BAli, 65; and Bakhsh,
370; and Bath, 369; as beyond
reach of law, 328-29; Blum’s
source on, 239; and Calvo, 213,
2i3n; and Carter, 83, 86-87; as
CenTrust investor, 72, 266, 295,
296, 422; and Connally bank
deals, 106-7; and Dajani, 139; and

Index

5 j 6 )

Pharaon, Ghaith Rashad (cont.)

DLF Finances, 70, 353-54^ Fed
bars from U.S. banking, 319; fine
imposed on, 353-54; Gokal com¬
pany sold to, 200-201; and Hunts’
attempt in silver market, 107; and
Independence Bank, 68-69, M9,
297, 319, 353, 422; indictments of,
351, 407; as investigation target,
319; and Jones, 372; and KIFCO,
8on; in Latin America, 215-16;
and Lodhi, 264, 265; and Main
Bank, 397; on mosque rebellion im¬
pact, 13m; and NBG, 38-39, 67,
69-70, 83, 107-8, 187, 265-66,
284, 319, 341; in N.Y. indictment,
320; in Occidental Petroleum, 42,
142; post-shutdown lawsuit
against, 315; and Pritzker family,
i25n; and REDEC, 68; and Young-
Abed i meeting, 85
and bcci, 158; account at Cayman
branch of, 200; and Cayman
entities’ stock, 231; and Correa da
Costa-Kissinger, 256; loan to, 198;
potential losses on accounts, 304;
and Senate investigation, 112; as
shareholder, 11, 194, 216
Pharaon, Rashad, 120
Pharaon, Wabel, 194, 196-97
Philippines, and Marcos-BCCI connec¬
tion, 157

Pillsbury, Michael, 375, 379, 380-81
Pirbhai, Ali, 82, 360
Pirzada, Sher Sultan, 329
Political contributions: and Bush ad¬
ministration on BCCI scandal, 364;
by Saudis, 104

Political corruption. See Corruption
Political influence: of Abedi and
Lance, 31; and BCCI affair, 434;
and BCCI indictment, 271-76; and
Clifford indictment decision, 406;
and money, 433-34; and Saudis’
dealings with Connally, 107; von
Raab sees, 368

Political motivation: and BCCI invest¬
ments in U.S., 77, 117; and BCCI
loans to Virani, 87; in First Ameri¬
can (FGB) takeover, 108-10, 412;
and NBG deal, 83; in Operation C-
Chase conclusion, 246-47, 250; in

probe of Clinton-Stephens associa¬
tion, 428

Ponzi, Charles, 198

Ponzi scheme, BCCI operations as,

198, 205, 252, 284, 289, 304, 329,
4M

Pota, Daud, 94
Powell, Robert E., 147-48
Prejudice, critics of BCCI accused of,
59, 89-90, 252, 275
Pretelt, Enrique (Kiki), 209, 225, 236
Price Waterhouse, 205-6, 288-89,

395 ? 399? 4 ^ 3 ; on Akbar payoff,
241; on Akbar tactics, 200; Altman
on documentation by, 295; and
Baqi, 402-3; and BCCI 1989 an¬
nual report, 291, 292; and Bench,

3 59? 3 8 2; on Capcom transfers,
204; Clifford cites as dupe, 336;
former officials of in Caymans,

403; on Gokal loans, 192; and
IML, 202; and Iqbal, 303; on Iraqi
debt, 139; lawsuit against, 395;
and Mazrui, 387; and Mercantile
Bank and Trust, 125; and Naqvi
files, 303-4; payoff possibility for
former officials of investigated,

403, 423; post-shutdown lawsuit
against, 315; and shutdown query,

3 17; Simonetti in, 113; on Zayed,
387; Zayed advertisement against,
318

BCCI AUDIT REPORTS BY, 289; Bank
of England on, 357; and
“confidential” accounts, 190; and
problem of separated units, 288-
89; secret investigation (1991),
305-6, 309, 398-99; special audits
(1989-90), 289-91, 296, 299-300,
327; on U.S. operations (1989), 267
Progressive Investment Company, 25
Pyatt, Rudolph A., 260
Pyle, Cathy, 97

Qabazard, Mohammed Hussain, 51
Qaddafi, Moammar, 9
Qasim, Ghassan Ahmad, 327
Qatar, 36, 36n
Qazi, Haroon, 266, 269
Quesada, Elwood R., 50, 51, 60, in,
h3?338

Quillian, Harry, 377

( 5i7

Quinn, Brian, 307, 307-8, 309, 310,
318

Quinn, Thomas F. (Tommy”), 172-
73 . i 73 n ,348
Qureshi, Moeen, 97-98

Racism, critics of BCCI accused of,

90. See also Prejudice
Racketeer Influenced and Corrupt Or¬
ganizations Act (RICO), 181, 407
Rackley, Charles, 230
Rahim, Begum Asghari, 79
Rahman, Masihur, 11, 12, 20, 87, v
155, 168, 184-85, 185, 189, 192,
201, 206, 298-99, 302, 328
Ramphal, Sir S. S. (“Sonny”), 88, 117
Rangel, Charles, 27on
Raouff, Sinan A., 175, 176
Rappaport, Bruce, 384, 384n
Ras al-Khaimah, 5, 9
Rauh, Carl, 333, 334^ 409,411
Razat Associates Inc., 200
Reagan, Ronald, 83, 231
Reagan administration, 103-4, 108,
132, 134 - 37 . i 3 8 . x 39 . 140, 141.
235,250,383
Rebozo, Bebe, 105
Refco (broker), 203
Regan, Donald, 382
Regardie, Bill, 294
Regulators, bank, 186-87, 252-53,
351-61, 433; and BCCI as exam¬
ple, 352; and Capcom, 205; and
College of Supervisors, 289; com¬
plaints about, 288; and Darwaish
case, 61, 62, 417; and move to Abu
Dhabi, 303; and restructuring,

305; and Vaez report, 187-89,

192. See also Bank of England; Fed¬
eral Reserve

Rehman, Aziz, 97, 217-19, 348
“Rent-a-sheikh,” 320
Republican party, 428-29
Resal Investment Grand Cayman Ltd.,
2 5

Reston, James S., Jr., 107
Riady, James, 366
Riady, Mochtar, 366
Ribicoff, Abraham, 33
Rice, Alvin, 360
Rich, William, III, 99
Richter, Bruno, 76, 341

Index

Ridsdale, Sir Julian, 87, 376n
Riegle, Donald, 273, 328, 373
Riggs National Corporation, 73
Riky, Shahid, 2i9n
Ritch, Leigh Bruce, 225, 235, 236,

2 37 . 2 47 . 37 2

Rizvi, Dildar, 29, 43, 47, 3470, 376n,
39L4I4
Rizvi, Iqbal, 94
Rizvi, Qamar, 25
Robb, Charles, 371
Roberts, Oral, 36

Robinson, Lake, Lerer Sc Montgom¬
ery, 386

Rockefeller, John D., IV, 371
Rodriguez, Cesar, 209, 225, 226, 235,

2 3 7 *

Rodriguez Gacha, Jose Gonzalo, 217,
348

Rogers, Adele, 106
Rogers, Ed, 362-64, 366, 427
Rogers, William D., 256, 256n
Rogers, William P., 106, 131
Romrell, Larry, 146, 147, 148, 149,

151

Roosevelt, Kermit, 118
Roosevelt, Franklin D., 102-3, 104,
281

Rosenblatt, William, 182, 368
Rosenthal, Benjamin, 58
Rosner, Brian, 285
Ross, Brian, 263
Roth, Toby, 334 " 35 . 33 7~ 3 8
Royo Sanchez, Aristides, 221, 222
R. P. Martin Bierbaum brokerage firm,
3i4

Rubenstein, Michael, 269, 277
Rubino, Frank, 271
Rushdie, Salman, 108
Russert, Tim, 330-31
Ryback, William, 286-87, 2 9G 2 95.
300,302,337

Sadat, Anwar, 119, 120-21, 121-22,
141

Sadat, Jehan, 121
Safeer consulting firm, 127-28
Safer, John, 40

Safire, William, 33, 46, 330, 363
Safra, Edmond, i74n
Said, Wafic, 366
Saigol family, 1, 4, 38

Index

518 )

St. Kitts and Nevis, 165
Sakhia, Abdur, 11,93, 96, 1 17, 166,
193, 2.17, 218, 245, 298, 345, 368,
373,435

Salavarria, Mauricio, 178
Samahoni, Hussain Abdullah, 389
Sami, Abdus, 35, 35, 41,48, 343, 414
Saphos, Charles S., 270-71, 358
Sasakawa, Ryoichi, 84, 84n
Saudi Arabia: Abedi’s efforts in, 121;
Abu Dhabi fear of, 9; and Adham,
48-49, 118-20, 123,404 (see also
Adham, Kamal); banking in, 206;
BCCI in, 167; and BCCI fraud,
424; BCCI shareholders from, 14,
194; and Bin Mahfouz indictment,
401-2; and Camp David peace
talks, 122; and CIA, 130; and con¬
gressional attitude to BCCI scan¬
dal, 373; covert funding requested
from, 153; and Deaver, 114; and
Dillon, Read, 367^ and Feisal Is¬
lamic Bank, 322, 424; foreign in¬
vestments restricted in, 59; and Pa¬
kistan, 100-101; sale of fighters to,
108; uprisings in, 131-3 2; and
Western media, 145-46; Young’s
visit to, 86; and Zayed, 7
and u.s., 101-6; and Carter, 107-8;
and CIA, 120; and First American
takeover, 108-9; and Jackson, 116;
U.S. support pursued, 132
Saudi Arabian Monetary Agency
(SAMA), 402

Saudi Research 6c Development Cor¬
poration (REDEC), 38, 68
Saudi Security 6c Technical Services
Company, 146

Saul, B. Francis, II, 42, 47, 54, 5511
Savings and loan industry, 70-72,

296, 376,422,423
Sayegh, Ahmed A 1 -, 386
Scarfo, Nicodemo (“Little Nicky”),

182n

Schroeder, Patricia, 330
Schuiling, William, 35-36
Schumer, Charles E., 271, 33 5, 347-
48,373

Scoffone, Vincent, 339
Scowcroft, Brent, 141, 142, 256, 366,
3^7

SEC: Aslam’s statement about, 414;

Boeing sued by, 48; and FGB take¬
over, 43, 46; and 5% disclosure
rule, 42, 43; Pakistan government
charged by, 385

Senegal, BCCI bribery in, 166, 408
Sethi, Najam, 3, 8
Shackley, Theodore, 130
Shaft, S. M., 213, 234, 239
Shaft, Saad, 181, 234, 247, 262
Shaft, Mansoor, 278
Shaheen, John M., 129
Shaik, Allaudin, 47, 164, 221-22
Shaikh, Akram, 82, 124
Shaikh, Bashir, 34711
Shaikh, Hashim, 190
Shakhbut bin Sultan al-Nahyan,
Sheikh, 5, 6-7
Shapiro, Kenneth, i82n
Sharif, Nawaz, 161, 366, 384
Sharjah, 5, 9, 14, 188; BCCI share¬
holders from, 194

Sharqi, Hamad bin Mohammed al-,
51,388

Sheikh, Hashem, 191
“Sheikh,” meaning of, 56
Shi’ite Muslims, 2, 3, 4, 131, 137, 191
Shoaib, Kemal, 69, 212, 213n, 319,
384-85

Shoaib, Mohamed, 212, 353-54
Shoob, Marvin, 383
Shorafa, Ali Mohammed, 51, 123, 388
Shultz, George, 106, 367n
Shumway, Norman, 230
Shutdown of BCCI, 311—13; and Abu
Dhabi, 385-86; and Bank of En-
gland, 311,317-19, 323. 357-5 8 ;
decision on, 307-8; and depth of in¬
solvency, 310; liquidation, 323-24,
392-95, 406; Mazrui informed of,
308; media response to, 3^-38;
and surviving culprits, 3 2^29; vic¬
tims of, 3 13-16, 3 24; and Zayed,
3 2 3 > 3 2 4 > 3 2 9 , 385-86, 391, 392.,
421

Siebert, Muriel, 58, 358
Sierra Leone, 168
Simon, Paul, 330
Simon, William, 106
Simonetti, Gil, 113
Sindona, Michele, 113, 11311
Singapore, BCCI rejected by, 96
Singh, Surjeet, 266, 269

Sisco, Joseph, 77

Skadden, Arps, Slate, Meagher 3 c
Flom, 43, 46, 47, 48, 333-34,
33411,408, 409,425
Skinner, Honey, 367
Skinner, Samuel, 367
Small, Richard, 321
Smathers, George, 44-45
Smith, Hedrick, 33-34
Smith, Lawrence G., 399
Smouha, Brian, 323-24, 392-93, 394-
95

Smuggling of coffee, by Bilbeisi, 177-
78, 180,181,350,394
Somoza Debayle, Anastasio, 215
Sonatrach, 367

Southeast Banking Corporation, 327
South magazine, 91-93, 94, 95, 117,
152 -

South Publications, 66, 293
Spadafora, Hugo, 224, 2240
Spain, 64, 95, 212, 289, 311
Special duties department of BCCI,
190-91, 192, 197, 204, 205, 207-8
Special Handling Unit, 81
Speculative trading, by BCCI, 199-204
Staff benefit fund, 30, 190, 194, 231;

looted, 206, 208, 313
Stapleton, Ruth Carter, 366n
Steel, 144

Stephens, Jackson T., 3 2, 37, 40-41,
4m,43,55,365,428
Stephens, Mary Anne, 3 65
Stephens Inc., 32, 43, 365, 370, 428
Stevens, Robert G., 60, 341
Stillman, Charles A., 426n
Sting operation, against drug money
laundering, 228-29, 232-34, 241-
44, 245-50

Stock Holding Company, 51
Stock manipulation, for BCCI, 195
Stoga, Alan, 142, 256
Stroessner, Alfredo, 215
Subordinated loans of stock, 149
Sudan, 18, 166, 168
Sukarno regime in Indonesia, no
Suleri, Shahid, 189

Sultan bin Abdul-Aziz al-Saud, Prince,
105, 366

Sultan bin Zayed al-Nahyan, Sheikh,
42, 43, 5m, 105, 344, 388, 390,
39 1 , 4 T 3 , 4 T 4 , 4 T 5

Sunni Muslims, 3
Sununu, John, 362, 363, 367
Suriname, BCCI loan to, 165
Swaziland, BCCI in, 18
Switzerland, 19, 139, 289, 311
Symington, James, 331
Symington, Stuart, 50, 51, 52, 60,
hi, in-12, 127, 128, 338
Systematics Inc., 40, 43, 428

Tahir, Bashir, 24

Tajir, Mahdi al-, 49, 4911

Talal bin Abdel-Aziz ibn Saud, Prince,

112

Tampa federal cases. See under Legal
proceedings
Tanzania, BCCI in, 96
Taylor, William, 307, 308, 326, 410
Tebbitt, Norman, 87
Technocrats’ faction in BCCI, 26, 229,
2 53 > 2 9 2

Tele-Communications Inc. (TCI), 145-
46, 148, 150-52,431
Telemarketing program of BCCI, 3 54,
4 22

Terrorism, 49, 58-59, 101, 130, 327-
38

Tersam, 123
Tetra Finance, 129
Thatcher, Margaret, 87
Thesiger, Wilfred, 6
Theus, Roma W., II, 276
Third World, 157, 211, 272; and
Global 2000, 84; South magazine
for, 91

and bcci, 155-56, 165-66, 167-
69, 313, 316, 359-60; 408,417-
18, 421-22; and BCCI’s identity,.
17; BCCI shutdown in, 315-16;
BCCI as U.S. contact point, 100;
and capital flight, 166-69; Young’s
introductions in, 96. See also Latin
America; Middle East; individual
countries

Third World Foundation, 66, 88, 91,
156,4 22

Third World Quarterly, 94
Thornburgh, Richard, 268, 270, 350,
3 ^ 1,374

Tischler, Bonni, 271

Togo, BCCI deposits from, 166

Torrijos Herrera, Omar, 221, 222

Index

5 20 )

Touche Ross, 323, 391-92
Tower, John, 142,379,3790
Tower Commission, 142
Tradigrain, 200-201
Transgulf Investment and Finance,

175

Treasury department of BCCI, specula¬
tive activities of, 199-204, 205, 395
Trendinvest Ltd., 384
Trento, Susan, 152-53
Triad International Marketing, 135
Trinidad, 165, 21 in
Trucial States, 5, 8
Truell, Peter, 295

Truman, Harry, 44, 103, no, 280-81
Tunisia, 166, 408
Turkey, BCCI in, 18
Turki bin Faisal al-Saud, Prince, 38,
108, 109, 124, 130, 133
Turki bin Nasser bin Abdul Aziz al-
Saud, Prince, 194
Turner, Ted, 145, 151-52
Turner Broadcasting System, 152
Tuttle, Baldwin, 74, 295, 358-59

UAE. See United Arab Emirates
ul-Haq, Inam, 144
Umm al-Qaiwan, 5, 9
Unification Church, BCCI compared
to, 21

Union Bank of Switzerland (UBS), 19,
236, 370

Union de Banques Arabes et
Francises, 139-40
United Arab Emirates (UAE): Abedi
rumored as responsible for, 11;
banking boom in, 25; BCCI in, 15,
17, 23, 25-26, 210; BCCI deposits
from, 188; and BCCI shutdown,
317; and College of Supervisors,
289n; foreign investments re¬
stricted in, 59; formation of, 8-9;
human rights suppression in, 49;
and Pakistan, 10; and PLO, 49;
Western support sought by, 132;
Young’s visit to, 86; Zayed as presi¬
dent of, 1

United Artists, 151
United Bank, 1, 2, 4, 12, 20, 28, 79;
loans to friends of Abedi by, 195;
Abu Dhabi branch of, 8; Awan at,
221; entertainment for customers

of, 79, 81; and Gokal, 185; and
Saudi Arabia, 121; and Zayed,

158

United States government: and Bilbeisi
dealings, 179-80, 182; and evi¬
dence of BCCI money laundering,
219-20; fixers and lobbyists in, 98;
and Noriega, 224, 235
AND DRUG TRAFFIC, 231-32; BCCI
indictments, 247-48; and Bush
presidential campaign, 246-47,
250; Noriega’s indictment, 235-36;
Senate investigation, 236-41, 242-
43, 244-45; undercover operations
against, 219, 228-29, 2.32.—34,

241-44, 24 5-50; See also CIA;
Congressional investigations into
BCCI; Federal Reserve; Justice De¬
partment; Legal proceedings

United States operations of BCCI, 30,
63, 64, 6411; and Americas Coordi¬
nating Committee, 340; and BNL
affair, 140; and Bush, 117; and
CenTrust, 266, 296, 3 19, 3 51 (see
also CenTrust Savings Bank); and
CIA, 117 (see also CIA); as compa¬
rable to Third World efforts, 433;
and FABNY, 405; and Fed supervi¬
sion, 352-53 (see also Federal Re¬
serve); and First American Bank-
shares, 72, 73, 75-77, 129,

265-66, 290-91, 32.5.

419 (see also First American Bank-
shares, Inc.); and Hart loan, 115;
and Independence Bank, 72, 149,
265, 293, 297, 319, 348, 351 (see
also Independence Bank); losses
from, 422; and NBG, 67-68, 72,
77, 3*9, 352., 353,405 (seealso
National Bank of Georgia); and po¬
litical motivation, 77, 87, 108-10,
117,412; prominent allies in de¬
fense of, 100; and regulators’ be¬
havior, 358-59 (see also Regula¬
tors, bank); and retail deposits,

354, 422; and Sakhia’s influence¬
seeking, 96-97, 117; Shoaib as
head of, 69; and shutdown, 312,
315, 323-24; special audit of, 267;
and Washington office, 97-98
early efforts: and Bank of Amer¬
ica, 34-35, 48; and Bank of Com-

Index ( ^21

merce, 35-36; and Chelsea Na¬
tional Bank, 3 5; and Lance, 30,

37, 83, 412 (see also Lance, T. Ber¬
tram)

entrance: and BAII, 64, 65; and
FGB takeover victory, 30, 50-60,
412; and Lance-Holley connection,
36-37; and Lance’s pursuit of FGB,
39-43, 46-48; and NBG purchase
by Pharaon, 37, 38-39. See also
Congressional investigations into
BCCI; Legal proceedings
Unwin, Brian, 250
Uruguay, BCCI in, 213
U.S. Agency for International Develop¬
ment, 315

U.S.-Iraq Business Forum, 142-43
Usmani, I. H., 82
U.S. Telephone, 150

Vaez, Joseph E., 187-89, 192, 355-

56,359

van Apeldoorn, Jan, 174, 175
Van Court, Frank, 107
van Oenen, J. D., 96
Vardaman, James K., Jr., 281, 294
Vastola, Thomas (“Corky”), 181-82,
i 82 n

Vaught, James, 179
Vega, Guillermo, 221
Venezuela, BCCI deposits from, 165
Vesco, Robert, 238
Villalba, Joseph, 177, 180
Vinson, Fred, 281
Vinson & Elkins, 107
Virani, Nazmu, 87, 324, 403
Vista Resources, 3 53-54n
Volcker, Paul, 58, 326, 429
von Raab, William, 231-33, 247, 249-
50, 252, 271-72, 286, 328, 368,

38i •

Wachtell, Lipton, Rosen & Katz, 46
Wadawalla, Yacoub, 138
Waldheim, Kurt, 89
Wallich, Henry, 77
Warnke, Paul, 433

Washington Suburban Sanitary Com¬
mission (WSSC), 114
Weber, Jean, 250

Wechsler, Lawrence, 254, 258-59,

262, 268, 275

Weidenfeld, Ed, 294
Weinberger, Caspar, 106, 36711
Western Tele-Communications
(WTCI), 148

West Marc Communications, 146
White, Bill, 365
Whittington, Bob, 387
Wilkie, Farr & Gallagher, 428
Williams, Edward Bennett, 126, 127
Wilson, Edwin, 130, 255, 257, 257n,
430

Winer, Jonathan, 264
Winter-Berger, Robert, 113
Wofford, Harris, 350
Wolff, Rudolf, 203
Woodward, Bob, 133
World Bank, 97-98
Worthen Bank, Little Rock, 366
Wylie, Chalmers, 334, 337
Wyman, Thomas, 40

Yamani, Ahmed Zaki, 101, 116
Yassin, Hassan, 55, 55-56, 57, 108-9,
116, 129

Yoma, Amira, 216
Yoma, Zulema, 216
Young, Andrew, 85-86, 96, 213
Yousufi, Mushtaq, 82, 360

Zaccaro, Thomas, 354n

Zambia, 96, 408

Zapata, Anibal, 219

Zapata Petroleum, 369

Zayed bin Sultan al-Nahyan, Sheikh,

I, 4, 6-8, 9; and Abedi, 1, 8,10-

II, 63, 79, 158; and Abu Dhabi In¬
vestment Authority, 51; and
Aslam, 389-91; and Bhutto elec¬
tion money, 79-80; and Bilgrami,
25, 212, 234, 388; and Boeing
deal, 49, 49n; and commodity mar¬
kets, 199; and Darwaish, 60-61,
342, 417; and drug traffic, 231; En¬
glish mansion bought by, 14; for¬
eign visits of, 24-25; and Gibson,
Dunn & Crutcher, 106; and Global
2000, 84; and human rights, 49;
law firm of (Patton Boggs), 273,
366, 428; and 1973 °il embargo,
14, 105; and Pakistan, 10, 100;
and Shorafa, 123; and terrorists,
101

Index

5 zz )

Zayed bin Sultan al-Nahyan (cont.)
and bcci, 23-24, 386-87, 424; in
Altman testimony, 345; Aslam on,
389-91,412-16; and First Ameri¬
can, 388-89; at founding of, 1,

158, 417-18; as depositor, 23, 195;
and FGB takeover, 109, no, 390-
91, 412-417; and front companies,
25; and “Gulf faction," 230; and
indictments, 401; Kerry on, 434;
and Lake, 429; in leadership crisis,
231; lending to, 387; and lending
practices, 186, 188; and move of in¬
criminating documents, 303; and
new capital, 206; post-shutdown
advertisement by, 318; post-shut-
down lawsuit against, 315; rescue
operation by, 291-92, 303; and re¬
structuring, 308, 309; as share¬

holder, 27, 57, 186, 193-94; and
shutdown, 323, 324, 329, 385-86,
391, 392, 421. See also Abu Dhabi
Zeibert, Duke, 73
Zhao Ziyang, 95
Zia-ul-Haq, Ijaz, 82
Zia-ul-Haq, Mohammed, 80-83, IOO_
101, 159; and Abedi’s pursuit of
China, 95; as BCCI resource, 94;
Carter and Abedi entertained by,

85; and Clifford as envoy to India,
hi; and drug trade, 160; and
Fazle Haq, 160; Gauhar defense of,
91; and ISLI, 133; and Mugabe re¬
gime, 94; and nuclear weapons,
143-44; and South magazine, 92-
93; and Soviet threat, 132
Zimbabwe, 93-94, 165
Zionism, 103, 261-62, 316, 329

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Full text of "False Profits : The inside story of BCCI, The World’s most Corrupt Financial Empire, Peter Truell and Larry Gurwin,Houghton Mifflin ( 1992)"

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